EasyJet share price is finding turbulence: is it a buy?

EasyJet (LON: EZJ) share price has had a mixed performance in the past decade. Its stock bottomed at 173.60p in 2011 and soared to 1,385p in 2018. It has now plunged by over 63% to the current 510p even as the company grew its market share in the European aviation industry.

EasyJet is a leading company in the aviation and holiday business. Its goal is to replicate Ryanair’s low-cost business model to become a major player in the industry. 

In addition to its low-cost flights, the company has diversified into the holidays business where it lets users book travel packages on its website. 

EasyJet’s business has bounced back after the Covid-19 lockdowns. Its annual results show that its load factor rose from 85.5% in 2022 to 89.3% in 2023 as the number of seats flown rose to over 92.6 million.

EasyJet’s revenue rose from £4.8 billion in 2022 to over £8.2 billion in 2023. Its profits boomed during the year, rising to over £432 million. £122 million of this PBT came from its holiday business, which facilitated over 1.6 million customers.

EasyJet, unlike other airlines, has not been hurt by the current Boeing challenges because its fleet is made of Airbus planes. Still, the challenge is that the supply chain challenges mean that Airbus is producing fewer planes than expected. It expects to receive 158 planes between this year and 2029.

EasyJet has set ambitious targets for the medium term. It expects to grow its profit before tax to between £7 and £10 per seat. It also hopes to grow its holiday’s PBT to over £250 million in this period. As a result, after reinstating its dividend in 2023, the company hopes to continue growing its payout gradually.

EasyJet’s business will likely show some growth this year as travel in the industry continues recovering. Most importantly, EasyJet has one of the best balance sheets in the industry. It has an investment-grade rating, adequate liquidity of over £4.7 billion, and net cash of £41 million.

There are a few risks for investing in EasyJet. The most important one is fuel costs, which could be affected by the ongoing geopolitical issues. There is also a risk of taxation as European governments continue focusing on climate issues. Its tax rate rose from 19% in 2022 to 25% in 2023.

EZJ chart by TradingView

EasyJet’s stock jumped to a high of 591p in April, its highest point since April 2022. It has now retreated and crossed key support levels. It dropped below the key point at 578.4p, its highest swing on February 2nd. 

Most recently, the stock has plunged below the key support at 529.4p, its highest level in April and May last year. It has also moved below the 50-day and 25-day moving averages. 

Oscillators like the Money Flow Index (MFI) and the MACD show that the stock has lost its bullish momentum. Therefore, its short-term outlook is bearish, with the next point to watch being at 461p, its highest point in September 2023.

In the long term, the stock will likely resume the bullish trend as investors cheer its revenue, profits, and dividend growth.

The post EasyJet share price is finding turbulence: is it a buy? appeared first on Invezz