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Is the easyJet share price the bargain of the year?

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I’ve been bullish about the long-term investment case for FTSE 100 budget airline easyJet (LSE: EZJ), even as the firm’s shares have fallen by 35% over the last year.

But the airline sector is notoriously cyclical. The shares were down by another 8% at the time of writing on Monday, after management warned that this year’s half-year loss would rise to £275m, from £18m last year.

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Is this the wrong time to be buying airline shares? Or is easyJet a contrarian buy for investors with a long-term view?

What’s gone wrong?

Although it’s normal for easyJet (and others) to make a loss during the quieter period from October to March, figures released by the firm today suggest to me that conditions may be tougher this year.

The company said that although total revenue is expected to have risen by 7.3% to £2,340m during the six months to 31 March, revenue per seat is expected to have fallen by 7.4% while costs have risen.

Unsurprisingly, easyJet says that “many unanswered questions surrounding Brexit” have resulted in weaker customer demand and softer ticket yields.

The figures weren’t a disaster. But management said that “our outlook for H2 is now more cautious”. I suspect City analysts will trim their full-year forecasts for the airline after today’s news.

However, shareholders should take comfort from the group’s healthy finances and modest valuation. The stock now trades on about 9 times forecast earnings, with a 5.3% dividend yield. I think easyJet remains safe to hold and could be worth considering as a contrarian buy.

I was wrong about this

Unfortunately I was wrong to be bullish about ticketing and virtual queueing technology firm Accesso Technology Group (LSE: ACSO) last year.

Shares in this business — which sells virtual queueing systems for theme parks and ticketing technology — have fallen by about 70% since last September. It’s a dramatic reversal for a company that was previously seen as a stunning success story.

Accesso’s shares started to fall in October last year, after the group’s half-year results showed that pre-tax profit fell by 12.5% to just $1.4m, despite sales growth of 17%.

The shares plunged again in February this year after the company said it had spent $1.7m on an acquisition opportunity before deciding not to proceed. The board said it was now going to carry out “a review of the Group’s investment priorities” but didn’t explain what this meant.

Last week Accesso published its full-year figures for 2018. These showed that operating profit fell by 37.6% to $6.3m last year, while net cash fell from $12.5m to just $0.5m. Chief executive Paul Noland also warned that the firm had decided to increase investment in new products, suggesting that more cash will be required this year.

Will Accesso bounce back?

This firm has some big contracts for its original virtual queueing products and it seems to be a market leader in this field. However, Accesso has now made so many acquisitions that I’m not sure how fast the underlying business is really growing.

The group isn’t very profitable either, with an operating margin of just 5.3% last year.

The overall picture looks complex and uncertain to me. Although this firm has some good products, I’m not convinced it’s a great business to invest in. I plan to avoid the shares for now.

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Roland Head 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.

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