The Price is (Still) Wrong - Blade Air (BLDE)
"The price is (still) wrong..."
“The price is wrong, bitch” - Adam Sandler as Happy Gilmore
Last week, Blade Air Mobility (BLDE) continued to prove that the market is still behind the curve when it comes to understanding the company when they announced earnings on May 7th. Once again, management executed on their short-term goals, resulting in beats on the top and bottom lines.
Before I get into the company’s earnings, I want to tip my cap to Blade’s entire team for executing in Q1 and blowing past estimates. I also want to applaud the individual efforts of Founder and CEO, Rob Wiesenthal, as well as Chief Financial Officer, Will Heyburn. Blade’s continued success is a direct result of their operational efforts and leadership, so hats off to them.
For those who are not familiar with Blade and/or would like a refresher, I recommend reading my first piece before reading on, which can be found here: The Market has the Story Wrong, Luxury is Essential
Earnings: Q1 2024
Total Revenue: $49.08mm estimate versus $51.51mm actual – Beat
+13.8% YoY compared to $45.27mm in Q1 2023
Adjusted EBITDA: Losses contracted by 54.1% to ($3.55mm) from ($7.72mm) in Q1 2023
Revenue by Segment
Passenger Revenue: Contracted (16.3%) to $15.49mm from $18.50mm in Q1 2023
Note: Blade previously discontinued their seasonal by-the-seat service between NYC and South Florida, which was the primary driver of the loss in revenue
Medical Revenue: Grew +34.6% to $36.03mm from $26.77mm in Q1 2023
Flight Profit: Increased by +41.5% to $10.14mm from $7.16mm in Q1 2023
Flight Margins: Flight margins expanded 386bps to 19.7% from 15.8% in Q1 2023
Guidance: FY 2024
Revenue: $240mm - $250mm - Reaffirmed
Positive Adjusted EBITDA
Looking Back
When I first wrote about Blade on March 27th, BLDE was trading at $2.86 per share. Today, stock closed the day at $3.68, which is a gain of +28.7%. During that same period, SPY has returned 0.02%, which is not a typo, SPY is flat during the same period.
Does that mean I’m the next John Nash? Probably not, but it does mean that the market is beginning to pay attention to Blade. Better yet is the fact that the market is still undervaluing Blade, in my opinion. I say better yet because I (selfishly) wanted to add to my existing BLDE position while the market mispriced the stock, which I did.
NOTE: John Nash, for you curmudgeons living under a rock, is the name of the mathematical genius portrayed by Russell Crowe in A Beautiful Mind, which is a true story and won four Academy Awards, but I digress.
As of today, BLDE and ENVX, which I wrote about previously, are the largest positions in my portfolio, each of which are ~10% positions.
Once I read through the earnings release, which were released pre-open on May 7th, I was worried that stock was going to rip higher, but stock closed down on the day of earnings at $3.58/share after opening at $3.72/share.
When it comes to trading after earnings releases, I follow a simple rule - don’t do it.
The reason why I don’t buy or sell right after earnings is because I’m not a mind reader, I can’t tap into the zeitgeist to know where stock is going to close following earnings announcements. On the other hand, I am smart enough to understand that I don’t know what I don’t know. So, rather than panic buying or selling a stock immediately after earnings, I take a day or two to take in the information before making a decision.
My Thoughts on BLDE Today
In all seriousness, the reason it took me a week to publish a follow up to Blade’s earnings is because I truly thought I was missing something that would explain the price action in the stock. Rather than force a piece out, I spent the last week combing through the BLDE earnings release and 10-Q to make sure I didn’t miss anything that would explain and justify the stock price. Had the market valued BLDE how I thought it should after Q1, stock would easily be $4+.
For the life of me, I couldn’t figure out why the stock has been range-bound since earnings on May 7th, but then I remembered that the market has always mispriced BLDE, so why would now be any different? Once I remembered that and went through due diligence, I can confidently say that Blade’s Q1 wasn’t just good, it was great. In fact, I am more bullish on BLDE than I’ve ever been.
How I View It
When it comes to investing in growth companies, I have an extensive list of attributes I look at before investing, but none are more important than:
Management team that are effective operators
Capital efficient – a la “Effective Growth”
Product and/or Service that differentiates itself from peers
Blade checks all three of these boxes.
Do I know what BLDE will report next quarter? No, but I do know that I trust the management team to continue executing while remaining efficient with capital allocation - same as they have in the past.
I also know that Blade’s MediMobility unit is the United States’ largest air transporter of human organs for transplant - a la differentiation from peers in the air mobility space.
Finally, from a fundamental valuation perspective, the company’s earnings/cash flow trajectory is strong and Blade’s balance sheet remains bulletproof even as the company buys back stock.
I’ve said it before and I’ll say it again: The price is (still) wrong, bitch.
The market has presented investors with an opportunity to buy a stock before the true value of the company is realized by the market. Rather than wait any longer, I suggest doing your own due diligence on BLDE as you consider it for your portfolio.
I will always keep you up to date if my thesis and/or position changes, but for now, I’m putting my money where my mouth is and leaning into BLDE for the long term.
Final Thoughts
Earlier I mentioned the efforts of Rob Wiesenthal and Will Heyburn, but what I didn’t mention was that on April 17th, I had the privilege of spending time with Rob and Will at Blade’s HQ in Hudson Yards. I wanted to spend time with Blade’s management team so that I could look any one of you, the readers, in the eye and tell you that I have vetted the company thoroughly.
I have an exciting announcement to make in the near future that will involve one of these two, but for now I will leave you with this:
After having met with Rob and Will I came away even more excited about Blade’s future with these two at the helm. Not only are they seasoned pros, but they are true believers in Blade as a company. They lead from the front, which shows itself in the company culture. On a personal level, they have aligned themselves financially with BLDE shareholders. Both Rob and Will continue to own millions of shares of BLDE, not having sold any outside of required sales for tax purposes.
Note: For those unfamiliar with a Form 4, any insider transactions must be filed via a Form 4. At the bottom of said form, you will see a section titled, “Explanation of Responses” which will list any relevant reasons for an insider’s transactions.
I have taken the time read through Form 4’s filed by the company and have seen the sales which were only for taxes. I am being emphatic because I have read other comments online where, those who are bearish on the stock, have incorrectly stated that management is selling stock - that is not true. All Form 4s filed for sales have been for taxes, which are equivalent to non-cash transactions. Meaning, they do not receive any cash, all stock sold is solely for tax purposes and immediately gets paid with the stock sold.
As always, if you have any questions for me on BLDE or if you just want to talk shop, I’m available via Substack DMs.