EasyJet share price analysis: buy, sell, or hold?

EasyJet (EZJ) share price has crawled back this month after going through substantial turbulence between April and August 10, when it slumped by over 31%. It has rebounded by 26% and was trading at 513p as most airline stocks recovered. 

Low-cost airlines are struggling

EasyJet, like other low-cost airline companies, has faced heightened scrutiny in the past few months.

In the United States, Spirit Airlines is on its deathbed, while other low-cost companies like Jetblue, Southwest, and Frontier are struggling. 

Similarly, Ryanair, the biggest airline in Europe, has also slumped by more than 25% from its highest level this year.

These companies are facing numerous challenges. Those using Boeng 737 Max have had to go through a major crisis. Boeing has been forced to reduce its production and ground most of the 737 lineup in the past few months.

Similarly, airlines using some Airbus planes, including EasyJet have faced Pratt & Whitney engine issues. 

Regional airlines are also seeing more competition in the aviation industry. For example, Saudi Arabia has launched Riyadh Air, a new airline that will start flying passengers in 2025. 

Many large airlines have also expanded their businesses to the low-cost segment, leading to more competition.

Additionally, there are worries that the industry will start slowing down as the concept of revenge travel fades.

Easyjet is doing well

EasyJet, one of the biggest European airlines is doing modestly well despite the recent challenges. 

In July, the company said that its passenger growth in the third quarter rose by 8%, leading to an 11% increase in its group revenue to £2.3 billion. 

Most of this revenue growth came from its ancillary segment, whose figure rose by 11% to £693 million. Also, its smaller holidays; revenue rose by 42% to over £336 million.

For starters, EasyJet makes money in three main ways. First, it makes revenue when people book and pay for their flights. Second, its ancillary revenue comes from the additional and voluntary fees that people pay for like bags and drinks. Third, EasyJet Holidays is a service where it offers packaged holiday solutions. 

EasyJet’s EBITDAR rose by 14% to £423 million, while its profit before tax (PBT) rose by 16% to over £236 million. 

This growth happened as the company continued growing its flights. It had over 49k flights in April followed by 54k and 53k in the next two months. As a result, its quarterly flights jumped to 156,487 from 146,816 in the same quarter in 2023.

Other metrics show that EasyJet’s business was doing well as the load factor rose to 90%, while the number of seats flown in the quarter rose to over 28 million.

EasyJet has solid fundamentals

The company has some of the best fundamentals in the European aviation industry. First, EasyJet is focused on the leisure industry, which explains why its holiday business is doing well. By having its own airline, it means that it can offer fairly cheaper packages than other large players in the industry. 

Second, the company has a fairly young fleet of aircraft, making it more attractive to many customers. Its average fleet age is 9.9 years and has ordered over 300 planes from Airbus.

Third, EasyJet’s strategy ensures that it has lower operational costs compared to other large airlines. In most cases, its Cost per Available Seat Kilometer is significantly smaller than that of British Airways, Lufthansa, and KLM. 

Most importantly, the company has ambitious targets of delivering £1 billion in pre-tax profit in the next few years. It also has one of the best balance sheets in the European aviation market.

The next key catalyst for EasyJet share price will be its full-year earnings scheduled on November 27.

EasyJet share price analysis

The daily chart shows that the EZJ stock price has done well in the past few weeks. It has soared from the August low of 404.7 to 525p.

The stock has moved above the 50-day and 200-day Exponential Moving Averages (EMA), and the 38.2% Fibonacci Retracement point. 

It recently formed a golden cross pattern as the 50-day and 200-day EMAs crossed each other. Therefore, the stock will likely continue rising as bulls target the year-to-date high of 592.2p, its highest point in April. This price implies a 12.70% jump from the current level.

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