Shares in low-cost airline easyJet (LSE: EZJ) have nosedived over the past two weeks. Investors have rushed to sell their shares in the airline due to fears about the spread of COVID-19, and the impact it could have on the airline industry.
As a result, shares in easyJet have fallen around 33% from their 52-week high, printed in mid-February. However, for long-term investors who are willing to look past near-term uncertainty, now could be a great time to invest in this global leader of low-cost air travel.
At the end of last week, easyJet warned it had seen as significant softening of demand and load factors into and out of its northern Italian hub, as well as other European markets, due to coronavirus concerns. The company also warned it’s too early to determine the impact the outbreak will have on trading in 2020.
Ultimately, the final impact on the company will depend on how long the virus outbreak lasts. If it’s contained within a couple of weeks, easyJet should be able to recover quickly from the disruption. If it lasts for months, or over a year, the business will have to make some tough decisions.
Indeed, its peers are already cutting routes, putting hiring plans on hold and reducing capacity.
Nevertheless, no matter how long the outbreak lasts, easyJet’s reputation for providing low-cost flights should endure. That suggests the airline could bounce back rapidly when the outbreak diminishes. So, as I said, now could be an excellent time to buy.
As noted above, it’s impossible at this stage to determine how much of an impact the outbreak will have on the company’s earnings for this year. However, if it recovers in 2021, analysts believe the business can earn 119p for the year. That puts the stock on a price-to-earnings (P/E) ratio of 9. A dividend yield of 4.9% is also on offer for investors.
Another airline stock that looks attractive after recent declines is Wizz Air (LSE: WIZZ). Like easyJet, the COVID-19 outbreak is having an impact on the company’s growth. Nonetheless, Wizz’s reputation as one of Europe’s most efficient carriers, as well as its green credentials, should help the company pull through to the other side.
Passenger numbers increased by 25.6% year-on-year in February as the group increased capacity by 26%. Despite this increase, total CO2 emissions per passenger kilometre declined by 2.5% to 57.3 over the 12 months to the end of February 2020. Management is expecting this figure to fall further as newer, greener planes enter the fleet.
As passengers become increasingly aware of the damage the airline industry is doing to the global environment, Wizz’s green credentials are quickly becoming the company’s unique selling point. That helps it stand out in the crowded budget airline market.
Recent declines have sent the stock plunging to one of its lowest valuations in the past five years. It’s currently dealing at a 2021 P/E of 10.6 compared to the five-year average of around 15.
Therefore, now could be an excellent time for long-term investors to buy a piece of this high-growth business too.
Rupert Hargreaves does not own any share mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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.