Concerns that

JetBlue's

(JBLU) - Get Report

growth plans could hurt its earnings have divided Wall Street in the wake of

a bearish report from J.P. Morgan last week, and shares slumped Monday despite a pair of positive research reports.

Fulcrum Global Partners analyst Jeffrey Kauffman and Raymond James analyst James Parker defended JetBlue on Monday, saying fears that the high-growth, low-cost carrier is stumbling are overblown. Last week, shares of JetBlue tumbled on the J.P. Morgan note, which said JetBlue's growth was too aggressive and would result in zero earnings growth for 2004.

Fulcrum's Kauffman disagreed with J.P. Morgan's conclusion, calling the brokerage's calculations a case of "fuzzy math" and terming JetBlue's issues "growing pains." After doing some pricing checks, Kauffman reiterated his buy rating and said JetBlue continues to have a pricing premium over rivals in its key Florida markets and notes the low-cost carrier filled nearly 83% of its seats in December, despite competition.

Likewise, Raymond James' Parker believes that J.P. Morgan's concerns are overblown, because in the first two quarters of last year, airlines were cutting back capacity because of reduced travel demand due to the war in Iraq, making the comparisons less useful. While J.P. Morgan said rivals will boost capacity on JetBlue's routes by 12% in the first quarter and 16% in the second quarter over year-ago levels, Parker said the capacity picture is much brighter on a quarter-to-quarter basis and expects JetBlue to have earnings growth of 16.3% in fiscal 2004.

"The sequential increases in capacity in JetBlue's markets should be 6% in the first quarter of 2004, which suggests that JetBlue has quite a capacity hill to climb, but not nearly the 17% capacity mountain as indicated by the year-over-year capacity increase," said Parker.

Parker said the capacity increases would continue to impact JetBlue's operating margins and lowered his fiscal 2004 earnings-per-share estimate to $1 from $1.08, which is lower than current Wall Street consensus of $1.03. But he reiterated his overperform rating on shares, noting that competition from legacy carriers is nothing new and that on a long-term basis JetBlue still has the advantage.

"Legacy carriers, from time to time, are going to make a run at JetBlue and other low-cost carriers because the low-cost carriers are rapidly capturing the domestic market," said Parker. "However, there is not much the legacy carriers can do on a sustained basis, given their high unit costs ... except throw money at the low-cost carriers, which is exactly what American is doing."

Indeed, American Airlines, a unit of

AMR

(AMR)

,

recently launched a promotion to retain market share in Boston, where JetBlue debuted service last week. Under the sale, American's frequent flyers will get a free round-trip ticket anywhere American flies if they purchase a pair of round-trip tickets on select routes that JetBlue flies to. The sale lasts only until April 15, but is aggressive and has already been matched by

Delta Air Lines

(DAL) - Get Report

, which is also looking to keep pressure on JetBlue.

The J.P Morgan report sideswiped JetBlue's stock, which had come off recent lows and rallied more than $2 in the first week of 2004. Over the final two sessions of last week, JetBlue fell $4.24, or 14.7%, to $24.68 on a total of 18.6 million shares, three times normal volume. In comparison, over the same two-day span,

Southwest

(LUV) - Get Report

dropped 7.7% and

AirTran

(AAI)

fell 5.7%, while

America West

(AWA)

dropped 4.3%.

And despite the positive comments from Raymond James and Fulcrum Global Partners, JetBlue's shares continued to slump at midday Monday, off 14 cents, or 0.6%, at $24.44.

But even as airline analysts snip their estimates on JetBlue, its valuation could finally be a bright spot. Because its stock has fallen faster than earnings estimates, JetBlue's valuation relative to peers has slipped considerably. For investors who believe the concerns over competition are a near-term blemish on a long-term story driven by low costs, JetBlue could be attractive again. Based on Friday's close of $24.68, the carrier trades at 24 times fiscal 2004 earnings, which is lower than Southwest's multiple of 26.3 times 2004 earnings.

"We are adjusting our fourth-quarter earnings-per-share estimate and 2004 EPS estimate to account for higher fuel prices," noted Kauffman, whose 2004 EPS call was dropped to $1.20 from $1.26 and is one of the highest on Wall Street, "but otherwise, we remain bullish on the story, and encourage accounts to take advantage of recent weakness."

Fulcrum Global Partners doesn't have any investment banking interests with JetBlue. Raymond James was a co-manager of JetBlue's initial public offering and said it plans to seek investment banking from the carrier in the next three months. Both analysts certified that no part of their compensation had either directly or indirectly influenced their views.