When I covered easyJet (LSE: EZJ) shares in October last year, they were very much out of favour with investors and, consequently, the share price was depressed. At the time, I said that if the airline could deliver an improved performance in 2023, there was a chance that the stock could experience “some form of rebound”.
Fast forward to today and easyJet’s share price is significantly higher than it was back in October. Here’s a look at how much I’d have now if I’d invested £10k in the stock three months ago.
easyJet’s share price has taken off
On 27 October, easyJet shares ended the day at 343p. Today however, they’re trading at 515p. That equates to a rise of approximately 50%.
What this means is that if I’d bought £10,000 worth of shares back then (assuming I bought stock at the closing price of 343p), my investment would now be worth around £15,000.
It’s fair to say I’d be very happy with that return. To generate a 50% gain in a year is a great result. To achieve that kind of return in just three months is an outstanding result.
Why the shares have surged
As for why easyJet’s share price has soared recently, there are a few reasons.
A strong trading update from the airline operator has been one driver of the share price rise. Earlier this week, the company told investors that it expects to return to profit this financial year (ending 30 September) and that it anticipated beating current market profit expectations on the strength of its summer bookings.
We have seen strong and sustained demand for travel over the first quarter, carrying almost 50% more customers compared with last year.
Johan Lundgren, easyJet CEO
Good updates from other airline companies have also boosted the share price. Earlier this month, easyJet shares rose after Ryanair hiked its full-year profit forecast.
Meanwhile, improved sentiment towards UK shares will have also helped the shares. It’s worth noting that three months ago, the stock market was under pressure from inflation and interest rate concerns. A lot of share prices were depressed.
Since then, the outlook for stocks has improved and the FTSE 100 index has jumped about 10%. And easyJet isn’t the only UK stock to have experienced substantial share price gains in a short space of time.
Worth buying today?
Are easyJet shares worth buying for my portfolio today? I’m not convinced they are, to be honest. Yes, the company has momentum right now. But after the recent 50% share price rise, I don’t see much value on offer.
At present, analysts expect easyJet to generate earnings per share of about 15p this financial year. This means that at the current share price of 515p, the forward-looking price-to-earnings (P/E) ratio is about 34.
Given this lofty valuation, I think there are better stocks to buy for my portfolio right now.
