The Motley Fool

Can the easyJet share price bounce back to pre-pandemic levels?

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 hasn’t had much luck in October. Starting at around 700p, the stock has continued its downward trajectory. And while the last two trading days saw some upward movement, it’s still down about 8.5% since the start of the month. Although it’s worth noting that despite this volatility, the 12-month performance stands at a fairly impressive 60% return.

Last week, the company released its latest trading update that showed some encouraging signs of progress. So, is now the time to add this business to my buy list? Let’s take a look.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

A chance for the easyJet share price to recover

The initial collapse of the easyJet share price is pretty self-explanatory. As Covid-19 spread worldwide, travel restrictions were put in place and borders closed. While necessary, this decision decimated the travel industry, easyJet included. With vaccines being rolled out, travel rules are getting looser. And easyJet is now able to once again provide its transportation services, even if it’s at a reduced capacity.

Looking at the latest trading update, the firm’s recovery seems to be making some solid progress. Passenger capacity in its fourth-quarter came in at 58% of pre-pandemic levels. This is actually slightly lower than the 60% guidance. However, it’s still up from 17% last quarter. And management expects this figure to continue rising to 70% over the next three months.

As a result of more seats being filled and new cost savings initiatives, the firm’s losses have been partially mitigated. Consequently, total losses for the year are now expected to be in the range of £1.14bn to £1.18bn. That’s still a substantial amount of money to lose. But the company currently has around £4.4bn of liquidity at its disposal. Therefore, meeting its near-term financial obligations shouldn’t be an issue. And providing that its recovery progress continues, easyJet should be able to return to profitability, taking its share price with it.

The threats on the horizon

The pandemic may be slowly coming to an end. However, the ongoing impact of the Delta variant could lead to existing travel restrictions remaining in place for a prolonged period. This could hamper the firm’s ability to raise passenger capacity levels moving forward.

However, ignoring the effects of the pandemic, there’s another major threat, I feel. Namely, oil prices. Last week oil prices reached a three-year high at $85/barrel due to forecasts of looming supply deficits. Unfortunately for easyJet and, in turn, its share price, oil is the primary ingredient in jet fuel.

Management has hedged around 55% of its fuel requirements using financial derivatives to keep half the costs static. But that still leaves 45% at the mercy of rising oil prices. And as fuel becomes more expensive, easyJet’s margins will likely get tighter.

The bottom line

After following the company’s progress throughout 2021, it’s clear to me that management’s recovery strategy is working. At least for now. But there remains a lot of short-term uncertainty surrounding this business that may continue to push the easyJet share price down over the next few months.

Therefore, I’m going to stay on the sidelines for now and wait to see what happens.

Instead, I'm far more tempted by another growth opportunity...

One FTSE “Snowball Stock” With Runaway Revenues

Looking for new share ideas?

Grab this FREE report now.

Inside, you discover one FTSE company with a runaway snowball of profits.

From 2015-2019…

  • Revenues increased 38.6%.
  • Its net income went up 19.7 times!
  • Since 2012, revenues from regular users have almost DOUBLED

The opportunity here really is astounding.

In fact, one of its own board members recently snapped up 25,000 shares using their own money...

So why sit on the side lines a minute longer?

You could have the full details on this company right now.

Grab your free report – while it’s online.

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.