What headwinds are easyJet shares facing?
Having said that, the easyJet share price also faces several headwinds. A recent downgrade by Deutsche citing ‘weakening’ airfares through to 2024 has depressed the mood of investors in easyJet shares. The airline also cited a “challenging summer” for the industry. Constrained airspace in Europe due to the ongoing Russia-Ukraine war as well as air traffic controller strikes in France are expected to hamper operations.
It doesn’t help that easyJet will be cancelling 1,700 flights over the summer too, as strikes at one of its busiest hubs, Gatwick, are back again. Nonetheless, it’s worth noting that the cancellation of 1,700 flights only constitutes c.1% of the total flights the FTSE 250 stalwart is scheduled to run over the summer. Therefore, the medium-to-long-term outlook for the easyJet share price remains extremely favourable.
As for worries surrounding lower airfares, higher volumes and capacity should compensate for lower ticket prices, particularly when capacity is expected to return to pre-pandemic levels by Q4. Plus, the decline in oil prices from a year ago should allow the budget operator to grow its profits again, and bring the easyJet share price up with it.
And with the recent results from Jet2 and Delta also showing encouraging trends, another upward revision to Holidays‘ PBT can’t be ruled out this week. Another upgrade could very well be the catalyst that sends the easyJet share price up and out of its current stall. Currently, Lundgren expects Holidays to post revenue growth of c.60% in FY23 with PBT of over £80m.
That said, investors may want to consider the current weakness in the easyJet share price as an opportunity to pick up a bargain, as the stock currently trades on a forward P/E of 10. Pair that with a returning dividend and an upside of c.25%, and this should cement the ‘Buy’ case for the stock as a no-brainer. Thus, given the strong momentum, it’s looking increasingly likely that it’s a matter of when and not if, easyJet shares can rise to £6 and beyond.
Discover: The full breakdown of easyJet shares on my easyJet share tip.
