The Motley Fool

Why I think the easyJet share price is a long-term buy

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Two women friends sightseeing in summer while on vacation.
Image source: Getty Images

The easyJet (LSE: EZJ) share price has been on a wild ride over the past 12 months. It’s easy to understand why. To try and control the spread of coronavirus around the world, governments have introduced travel restrictions. These have devastated the demand for air travel.

And while the outlook for specific sectors of the economy has started to improve over the past few months, the outlook for the airline industry remains incredibly uncertain.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

Indeed today, the easyJet share price and that of the company’s peers are trading sharply lower on speculation the government could extend the international travel ban. 

Uncertainty prevails

Here at the Motley Fool, we are long-term investors. That means we consider the long-term potential of a business rather than speculate about what could happen in the next few weeks or months. 

As such, when reviewing easyJet, I try to take into account its long-term outlook. 

Over the long run, I think the company has incredible potential. Its brand is one of the most established in the European aviation industry, and while it may not have the best record of customer service, its reputation is better than other low-cost peers.

The airline’s average fee is also more than double that of its closest competitor Ryanair, but customers get much more for their money

Unlike many of the company’s European peers, easyJet also ended the crisis with a strong balance sheet. As a result, the organisation has been able to avoid taking a government bailout or collapsing. 

The easyJet share price as a long-term investment

These qualities lead me to conclude that easyJet could be an excellent long-term investment. In my opinion, the best long-term investments are those companies with substantial competitive advantages and robust balance sheets. My research shows easyJet has both of these qualities. 

That’s not to say the business doesn’t have its risks. The airline industry is incredibly competitive. There’s a high chance a fares war will break out after the pandemic as operators fight for customers. This would have a detrimental impact on the group’s recovery.

Analysts have also expressed concern about the group’s expansion pace. This could leave it with a more extensive-than-needed fleet and a weak balance sheet.

So far, the company has managed to avoid these challenges, but there’s no guarantee this will continue to be the case. 

A long-term buy 

All of the above leads me to the conclusion that easyJet is a long-term buy. However, the group’s short-term outlook depends on how quickly the global economy recovers from the coronavirus pandemic.

If the international travel market picks up towards the end of this year, the value of the stock may increase dramatically. If not, the stock could continue to fall. 

Nevertheless, despite this uncertainty, I’d buy the stock for my portfolio today based on the qualities outlined above as a long-term investment.

There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it!

Don’t miss our special stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.

That’s why they’re referring to it as the FTSE’s ‘double agent’.

Because they believe it’s working both with the market… And against it.

To find out why we think you should add it to your portfolio today…

Click here to get access to our presentation, and learn how to get the name of this 'double agent'!

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.