The Motley Fool

The easyJet share price is up over 70% in 12 months. Here’s why

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.

An easyJet plane takes off
Image source: London Luton Airport

The easyJet (LSE:EZJ) share price has had a rough time since the pandemic began. But now that lockdown and travel restrictions are starting to ease, the firm might be on the verge of making a comeback. Last month, the management team released its third-quarter trading update. And since then, the easyJet share price has moved up by around 10%, despite last week’s tumble. This pushes its 12-month performance to just under 75%. But can this upward trajectory continue? And should I be considering this business for my portfolio? Let’s take a look.

The easyJet share price is starting to fly again

One of the biggest positive signs I spotted in the latest trading update is the massive 3,381% boost in flights compared to last year. There seem to be multiple contributing factors behind this stellar growth. First and foremost is obviously the lifting of many travel restrictions in the UK and Europe now that vaccines have begun rolling out. However, some of this growth can also be attributed to a shift in strategy.

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…

It seems the management team has been moving flight capacity to Europe rather than the UK as travel restrictions are less strict there. Consequently, passenger capacity onboard has been steadily increasing over the last three months from 52% in April to 72% in June. Needless to say, that’s fantastic news for the business. And ultimately led revenues for the quarter to increase from £7.2m last year to £212.9m this year. So, I’m not surprised to see the easyJet share price take off. But there’s still a long journey ahead.

The risks that lie ahead

While these latest figures are undoubtedly promising, they still pale in comparison to pre-pandemic levels. A total of 2.99 million passengers were flown this quarter. That certainly seems like a lot. But it’s actually only around 17% of the passengers flown in 2019. And with the Delta variant of Covid-19 causing infection rates to rise, there’s a mounting level of uncertainty about how long before the business can return to its pre-pandemic passenger volumes.

Beyond this, the company is still firmly in the red, with third-quarter losses coming in at £318.3m. This is a slight improvement compared to last year’s £346.8m loss for the same period. However, it also means the firm is continuing to burn through its cash to keep its planes in the sky. Needless to say, that poses a significant threat to easyJet and its share price if it is unable to raise additional capital or return to profitability in the future.

The easyJet share price has its risks

The bottom line

The unprofitable nature of the business is somewhat concerning. But I do find it encouraging to see that the firm’s cash burn has reduced to £34m per week. That’s actually lower than the previously provided guidance of £40m. In my eyes, that indicates smart capital allocation decisions. And with £2.3bn of cash on the balance sheet, easyJet should have enough resources to spare to see it through the remainder of the pandemic (assuming expenses don’t rise again).

Overall, I think the worst has passed for the easyJet share price. And with UK airports reporting passenger volumes at the highest point since the pandemic began, it looks like the company is on course for making a steady recovery. Therefore, I would consider adding some shares to my portfolio today.

But it's not the only business I have my eye on...

Our #1 North American Stock For The ‘New-Age Space Race’

Billionaires like Jeff Bezos, Bill Gates, Elon Musk, and Mark Zuckerberg are already betting big money on the ‘new-age space race’, and for one very good reason…

…because this is an industry that according to Morgan Stanley could be worth $1 TRILLION by 2040.

But the problem is most of their investments are in private companies — meaning they’re largely off-limits for everyday investors.

Fortunately, our team of analysts have identified one little-known company that’s at the cutting-edge of the space industry, and is currently trading at what looks like a VERY reasonable valuation

for now.

That’s why I want to urge you to check out our premium research on this top North American space stock ASAP.

Simply click here to see find out how you can grab your copy today

Zaven Boyrazian 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.