Times have been tough for holders of easyJet (LSE: EZJ) shares. They could be about to get even tougher.
Next month, the company will provide investors with final results for its 2019/20 financial year. Now, no one expects the numbers to be good. Indeed, easyJet has already warned that its first-ever annual loss could hit £845m! Nevertheless, the possibility of another lockdown and further travel restrictions could result in more investors deciding to jettison the stock in November.
The company is doing what it can to mitigate things. Most recently, easyJet reported that it had raised almost £306m through the sale and leaseback of nine Airbus 320 aircraft. This will help shore up the balance sheet but it’s unlikely to be enough. Indeed, the mid-cap has called on the UK government to provide more support to the sector in October.
Clearly, easyJet shares could do very well in the event of a sudden vaccine breakthrough or reduction in infections. Right now, this looks like wishful thinking. With industry peer IAG warning that passenger numbers won’t recover to pre-coronavirus levels until 2023, the runway to recovery looks long and hard.
This is not to say that the Luton-based airline is the only company whose owners face a nightmare November.
Time at the bar?
Holders of JD Wetherspoon (LSE: JDW) may want to look away from the pub chain’s share price when it provides a trading update on the morning of 11 November.
I can’t see the numbers and outlook as being anything but bleak. After all, JD Wetherspoon already announced its first annual pre-tax loss since 1984 earlier this month. The recent introduction of curfews across many parts of the UK is unlikely to have improved the situation. News of the company needing to slash jobs, while not unexpected, doesn’t bode well either.
Like easyJet shares, the question to ask is how much of this is priced in. At half the price they were at the beginning of 2020, you might think ‘quite a lot’. Moreover, analysts are expecting earnings to rebound massively in FY22, leaving the shares on a P/E of 13 (if you still pay any attention to forecasts).
Nevertheless, I’d be inclined to look elsewhere, at least until the crucial coronavirus ‘R rate’ is on the retreat. On a risk-reward basis, JDW still doesn’t tempt me.
A final share that could face selling pressure next month is high street retailer and travel concession operator WH Smith (LSE: SMWH). The company is due to announce its latest set of full-year numbers on 12 November.
Before the coronavirus reared its ugly head, it was a quality business generating excellent returns on capital employed. Since then, we’ve had the double-whammy of deserted high streets and a myriad of travel restrictions. The latter is particularly problematic since this was the main growth driver for the FTSE 250 member.
With Boris Johnson’s fingers hovering over the ‘lockdown’ button, it does feel like things could get worse before they get better. More restrictions would likely have a severe impact on pre-Christmas high-street sales for the company. I wouldn’t like to bet on it being able to compete with the likes of Amazon for online book sales either.
For now, WH Smith is treading water. Next month could see it sink. Now is not the time to be getting involved, I feel.
Paul Summers 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.