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Jetblue Airways Ipo Valuation

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Written Analysis #3

JetBlue Airways IPO Valuation (Case 28)

You will be required to submit a three to four page written analysis, not including footnotes, appendices, and supporting spread sheets, etc., in class on June 20, 2011.


In order to accomplish your analysis, you will have to calculate, analyze and clearly incorporate the following points plus any others that you feel are relevant in your commentary:

1. Using DCF models (ie. FCF ) determine a price(s) for the IPO. What discount rate is appropriate for the cash flow forecast. Be sure to clearly describe your methodologies, calculations, and assumptions.

2. Using a comparable multiple approach determine a price(s) for the IPO. Be sure to clearly describe your methodologies, calculations, and assumptions. Which airline(s) most closely fits the JetBlue model and, why?

3. What are the pros and cons of each of the above two approaches as they apply to JetBlue. Considering these pros and cons, determine a new price based on one or some combination of both of these methods. Clearly, state your reasoning for this new price.

4. Specifically, how will you modify the price you obtained in step 3, above, to take into account the "IPO underpricing phenomenon" as well as the realities of the current market environment.

5. Based on all of the above what is your specific recommendation for the IPO price (one number).

Your determination should be backed by facts and calculations. Be sure to clearly show the assumptions you used in the calculations. This can usually be accomplished by using footnotes and appendices carefully.

Your analysis should be in the format of a running commentary making sure you cover all the points above. While I would like all the issues addressed, above, I do not want to see this report in a question and answer format.

Your grade will be based on how well you organize the commentary of your analysis (with particular emphasis on backing up your assertions with calculations, assumptions etc.), how clearly you provide me with the content points listed above, the clarity of your assumptions, and your calculations. This study counts 20% of your total grade.



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