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Why easyJet stock could now soar after H1 results

Image source: London Luton Airport

easyJet (LSE: EZJ) stock should pique interest following the release of the airline’s H1 figures.

Its latest trading statement might have revealed a first-half year loss ranging between £690 to £730 million, but this was below expectations. 

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A strong grip on cost cutting was achieved by cash-generative flying over the quiet winter period, and capacity forecasting also contributed to lower cash burn.

Additionally a surer financial footing has also been reached by raising £5.5 billion since the pandemic, resulting in easy access to £2.9 billion in funds.

In the current pandemic climate, it can’t come as a surprise that passenger numbers fell by 89%, with group revenue spiralling down by c.90% to around £235 million.

Yet despite the crippling conditions for all airlines over the past year, easyJet stock has still impressively climbed upwards by c.45%.

But the share price is still way below pre-pandemic peaks, suggesting room for further price growth.

Reasons to be optimistic

From May onwards many countries are likely to open up to travel, with restrictions in place with regard to transporting Covid-19 variants.

Across the EU a ‘vaccine passport’ system conceived by the European Commission is now at a more advanced stage. The hope is that a certification process will be in action by the summer.

The aim is to provide evidence that travellers have been vaccinated, or have either tested negative or have fully recovered from a Covid-19 infection, allowing them to board a plane for that much-yearned-for sunshine break.

While in the UK, its Global Travel Task Force is looking to adopt a ‘traffic light’ system, based on the risk involved in travelling to a country, alongside a certification process.

Outside of a few longer-haul routes to North Africa, such as Tunisia and Israel, all of easyJet’s flights are all around Europe.

The moving forward of legislations are a clear sign of foresight on getting the travel industry going again, boosting market confidence, which is why I am looking to invest in easyJet stock.

easyJet itself is optimistic, and it forecasts flying at 20% of capacity levels in Q3 compared to a year ago, with footfall increasing from May onwards.

Hurdles still to clear

It’s an unclear picture just how realistic that a functioning travel system can be achieved this summer, as coronavirus cases remain high across many parts of Europe.

New and dangerous variants of Covid-19 are a lingering threat.

France announced new lockdown measures only as far back as March 31, while Germany and Italy are also currently dealing with a high level of Covid-19 infections.

It’s a mixed bag for other typical holiday destinations. Spain have cases under control, as opposed to Greece who are experiencing a relative spike in positive cases since February.

Also, the vaccination programme in many European countries has been relatively far slower, in comparison to the UK and Israel.

Yet vaccine logistical problems seem to be clearing, as jab rates are increasing in most EU members.

Doubts over the AstraZeneca vaccine, and the delay of the Johnson & Johnson roll-out in Europe over potential rare blood clots, are a further concern in reaching some kind of stability.

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Peter Taberner 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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