Here’s why I’d buy the dip in the easyJet share price

The easyJet share price is tumbling on poor results, but Manika Premsingh thinks this is an opportunity to buy, not run for cover. 

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The low-cost airline has come a long way in the past year, but the easyJet  (LSE: EZJ) share price has dipped today. Its share price is down almost 3% as I write, on poor results. 

Expectedly dismal results

Its revenues declined by 90% for the six months ending March 31, compared to the same period last year. Its loss increased by more than 3.5 times to £701m, in line with expectations.

That the company was expecting a big loss is hardly surprising. Vaccines were developed only in November, which was already one month into the six months in question. And it took still longer for the vaccination rollout to kick off. 

So, the pandemic was still very much raging in the period for which the results have been reported. Further, easyJet’s biggest market, the UK, was in lockdown for much of the time. 

This has, of course, shown up in low travel numbers. An 89.4% drop was seen in passenger numbers and capacity decreased by 85%.

As I looked at the numbers, the question I found myself asking was: why is the easyJet share price reacting this way if the results were expected? I think one reason for this is its weak outlook. 

The low-cost airline expects to fly only 15% of capacity in the third quarter. This is after the lockdown is slated to completely lift in the UK. It also indicates that summer travel will be muted, despite much progress with vaccinations. It has also provided no guidance for the current financial year. 

Not as bad as it looks

These numbers look dismal, I know. But I am actually quite bullish on easyJet. In fact, I even bought its shares last year. And purely from my own example, I can say that it has been a rewarding experience. The airline’s share price has almost doubled since the same time last year. 

But the question now is if easyJet can continue to make gains. 

I think it is possible. Its share price is still way below its pre-pandemic highs. This is true for many travel stocks whose future is still far more uncertain than other reopening stocks like retailers or even pubs. 

But it would be fair to say that the extent of uncertainty is declining. Even though new variants are bringing in fresh threats, large-scale vaccinations have reduced the severity of the pandemic. So, if anything, I am optimistic about easyJet’s future. 

My takeaway for the easyJet share price

There can be some wobbles along the way as long as coronavirus is still around. But in the overall scheme of things, I reckon the airline will do better. The company notes that it is “the largest operator to Green list countries”. Further, it is ready to ramp up flying in the summer as European governments ease travel restrictions. It can operate up to 90% of its capacity if demand increases. This suggests that it is probably conservative in its outlook right now. Things may turn out better than it suggests in its latest release.

easyJet is still a buy for me. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of easyJet. 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.

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