The last few years have seen the easyJet (LON: EZJ) share price falling sharply. Currently sat at 565p, this is a major drop from its price before the pandemic struck the market in March 2020.
However, the stock has shown signs of potential in recent times. And since early March the easyJet share price is up over 25%. So, will this upwards trajectory continue? Or should I be steering clear of it? Let’s explore.
Strong travel expectations
One positive for easyJet is that it should be able to capitalise on rising demand as more countries continue to remove travel restrictions. Examples of this include Italy, which recently dropped its ‘state of emergency,’ while from early May, Greece will join the growing list of restriction-free European countries. As a result, easyJet recently announced that demand for summer bookings over the past six weeks has exceeded that of the same period in 2019. Given the struggles it has experienced through the pandemic, this is great news for the firm.
On top of this, easyJet recently posted some solid results. The firm has managed to reduce its net debt from £900m to £600m, while March saw 80% passenger capacity compared to March 2019. It also stated that 64% of fuel for the second half of the year is hedged at $571 per metric tonne, partially offsetting the impact of current rising fuel prices. These results show the business is moving in the right direction post-Covid, as it edges closer to full capacity in the near future. As a potential investor, these are pleasing signs.
easyJet concerns
However, rising fuel costs should still be of concern to easyJet. While hedging 64% of fuel may provide some short-term protection, the increase we’re witnessing will still have a big impact on the business. Should this eat into revenues, I’d expect to see a fall in the easyJet share price.
And it’s not just the cost of fuel that’s on the rise. With inflation soaring, people are seeing a sharp cost of living increase. While the business is experiencing high demand, a continuation of the rise could see future bookings impacted. This could have negative connotations for the firm and its stock.
The disruptions easyJet has recently been facing will also impact it. In some bases, up to 20% of staff have been off work due to rising Covid-19 infections. And earlier this month, it cancelled over 200 flights in one weekend. This is expected to continue to later into the year. When considering buying easyJet shares, this is a concerning factor.
So, where is the easyJet share price going next?
Where the easyJet share price goes next depends on a few factors. If it continues with its strong progress post-Covid, and if demand continues to rise, I think easyJet could have a strong finish to the year. However, despite the progress it has made, I see it struggling in the months ahead. Rising fuel costs, inflation, and Covid-19 cases could see the firm suffer. And as a result, I won’t be buying the shares just now.
