FTSE 100 budget airline easyJet (LSE: EZJ) was among the most badly affected by the coronavirus crisis. But that seems to be in the past now. The easyJet share price bounced back in June. On average, it’s up 43% from May. It looks like a missed investing opportunity now. But is it really?
I think the answer will become clear only over time. And it will depend on how the global health situation evolves. The easyJet share price is sensitive to news updates. It got a huge bump up in late May as the company’s internal conflict got resolved. It showed a sharp increase again in early June, when it said that it was ready to resume flights. The day after this news broke, it rose by a whole 15%. It hasn’t seen such a sharp movement since.
What’s next for the easyJet share price?
But that’s just the short term. Our focus here at the Motley Fool is on long-term investments. There’s good news there too. I think there’s room for further rise in the easyJet share price. Even with its impressive recent improvement, the share price is still 43% lower than in January this year.
According to Financial Times data, the more optimistic analyst estimates, suggest that EZJ could surpass those January 2020 levels over the next year. However, most analysts aren’t as bullish on easyJet.
The company’s earnings will take a beating this year, but are expected to back in the green in 2021. I think is positive news for investors with a longer-term horizon.
This doesn’t mean that there are no risks to the easyJet share price. Imagine what might happen if recovery from the Covid-19 pandemic takes a turn for the worse. In fact, there have been increasing reports of a fresh rise in coronavirus cases. Beijing, for instance, cancelled 1,200 flights recently. There’s also news of an increase in cases in the US. The US and China are the two largest economies in the world. If they start shutting down again, it’s bad news for the rest of the world, and consequently aviation stocks.
On balance though, I think things are on the mend for EZJ and its peers. Coronavirus cases might have reappeared, but they still seem to be under control. Moreover, health systems are now better geared to handle Covid-19. In other words, it’s unlikely to cause the same level of damage it caused earlier. The economy will stay uncertain for the next couple of quarters at least, but rapid policy responses are likely to keep it afloat.
I’ve been cautiously optimistic about the easyJet share price in the past. I remain so, with the risks to its performance decreasing. But, for those among us looking for safer investments, there are other options too.
Manika Premsingh 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.