easyJet (EZJ) share price has fallen over the past two weeks as the war between Russia and Ukraine threatens to disrupt multiple aspects of the European economy, including air traffic.
“EasyJet was deviated from its trajectory [on] its road to the FTSE 100. It had made great strides on its flight path to recovery, but the war that broke out on Europe’s doorstep confused the market. Shares fell another 5.5% today [1 March]and are down 15% since Russia invaded Ukraine,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.
The uncertainty of the situation and its potential ripple effects on the mainland economy could affect the consensus forecast for easyJet’s share price. In this article, we will discuss the latest news on easyJet stock as well as share price developments and fundamentals to sketch out plausible scenarios for the future.
EasyJet inventory analysis: technical view and price drivers
For market participants, an aggressive Russian response to the European Union’s involvement in the armed conflict, as well as operational disruptions caused by the introduction of no-fly zones, have increased pressure on airlines airlines that operate in the area, including easyJet.
The European Union Aviation Safety Agency (EASA) has issued several guidelines on how carriers should modify their operations amid the ongoing military conflict. According to the agency’s latest update, several air zones on Ukrainian, Russian, Moldovan and Belarusian territory have been reported as no-fly zones. Operators have been instructed not to operate in these areas.
Streeter said: “Airlines have experienced even more turbulence as fuel costs rise and concerns grow over the impact of the Ukraine crisis on traveler sentiment. The closure of the airspace around the conflict zone and the ban on flights from Russia in many skies have added to the operational difficulties of companies with regular routes in the region.
“Longer term, it is higher fuel costs that are likely to weigh on the sector once the immediate headache of re-routing flights is alleviated. The fear is that prices will rise much higher if Russia retaliates against sanctions and weaponizes oil, severely limiting supplies to Europe.
EZJ shares were boosted in January by expectations that passenger volumes should continue to recover to pre-pandemic levels as the severity of the health crisis appears to diminish thanks to mass vaccinations and antiviral treatments. recently introduced.
Matt Britzman, equity analyst at Hargreaves Lansdown, said: “The reduction in travel restrictions announced by the UK government on January 5 and the further drop in testing requirements has finally given airlines some good news, and easyJet has seen a immediate increase in sales off the back of the ads. This comes after a difficult few months where Omicron fears and restrictions caused passenger numbers to drop to 67% in December, with a further drop to 50% expected for January.
However, February was a negative month for easyJet amid the conflict between Russia and Ukraine. The recent decline in EZJ’s stock price has sent the airline’s stock into negative year-to-date territory as it traded 9.88% below its 2021 closing price on the 2 March.
At the time of writing, the stock has broken below a relevant support zone at 565p per share. An escalation in the military conflict could accelerate EZJ’s downtrend, while peace talks and other resolutions that may end the situation could have a positive effect on easyJet’s share value.
Momentum indicators at the moment (March 2) have favored a short-term bearish outlook with the Relative Strength Index (RSI) standing at 33 (neutral) while the Moving Average Convergence Divergence (MACD) has moved into negative territory, indicating a ‘sell’ signal.
EasyJet Fundamental Analysis: Latest Earnings
On January 27, easyJet released a business update covering the quarter ended December 31, 2021. This is the company’s first fiscal quarter of fiscal 2022.
Total group revenue for the quarter ended at £805m ($1.07bn), leading to a significant improvement in the company’s performance from £165m that she reported in the same quarter a year ago.
The number of flights operated during the quarter jumped to 85,618 from the 23,428 the airline operated in the first quarter of 2021. Meanwhile, the number of passengers who flew with the company fell from 2.86 million to 11, 89 million.
Load factor – a key operational measure – increased by 1,100 basis points on an annual basis as well as to 77%.
Pre-tax losses for the period ended at £213m compared to the £423m the business lost in the first quarter of 2021, while the business burned £450m in cash in during the period, compared to £969 million the previous year.
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The company said none of its debt would come due until at least 2023 when its net debt stood at £1.2m. Meanwhile, the cash and cash equivalents total ended at £2.9bn.
Commenting on the company’s results, Britzman said: “Unsurprisingly, revenue figures improved significantly over last year in the first quarter when the planes were grounded – revenue was almost five times that of last year and net losses were halved to £213m. The focus on short-haul travel puts easyJet in a better position than its long-haul rivals when it comes to capturing returning passengers. UK beach and leisure routes are set to benefit from pent-up travel demand as a result of Omicron, and it shows, with capacity expected to return to pandemic levels by Q4.
EasyJet Share Price Forecast: Analyst Sentiment
Are easyJet shares a ‘buy’, ‘sell’ or ‘hold’? The consensus rating for EZJ stock compiled by MarketBeat as of March 2 was “hold,” with eight of 14 analysts rating the stock “buy” while four rated EZJ “hold.” Two other financial institutions have given EZJ a “sell” rating.
The average analysts’ forecast for easyJet’s share price has been set at 734.5 pence per share, which would translate to a potential gain of 34% from its last closing price of 546.20 (on the 1st). March) if this objective is achieved. The highest 12-month target was 900p while the lowest was 460p per share.
After easyJet released its latest business update on January 27, analysts at Hargreaves Lansdown wrote:
“It is far too early to say that the difficult times are over for easyJet, with the pandemic lingering and inflation looking persistent. So far easyJet has made the best of a very difficult situation – overcoming perhaps the biggest crisis to ever hit the airline industry. But we’ve seen with our own eyes how quickly things can turn for airlines, so we’re not too excited just yet.
Commenting on the company’s outlook, Capital.com analyst Mikhail Karkhalev said:
“After a pandemic decline, easyJet is gradually recovering passenger volumes. In addition, the company managed to reduce its losses. At the end of 2021, easyJet’s net loss was $998 million, 16% better than in 2020.
“The company’s total revenue in 2021 also reached $1.7 billion, 50% better than 2020. The low-cost carrier plans to increase flights from the UK to Turkey and Egypt this year, as capacity is up 26% compared to 2019, while sales to beach destinations are expected to increase by 14%.
“Nevertheless, the company’s shares can only be considered for purchase in the long term. It’s even hard to guess at the moment how 2022 will turn out.
Meanwhile, algorithmic price prediction service Wallet Investor has shared a bearish forecast for easyJet’s share price for 2022 and beyond (as of March 2, 2022). He expected EZJ share price to decline to 483.19p by the end of 2022, and continue to decline to 337.19p in 2023 and 50.13p by the end of 2025.
Although the service did not provide 2030 targets, its five-year easyJet share price forecast suggested the price could crash to zero in February 2027. Note that algorithm-based estimates are created by analyzing the evolution of the share price, without taking fundamental factors into account.
When researching easyJet’s stock forecasts, it’s important to keep in mind that analysts’ forecasts may be wrong. The projections are based on carrying out a fundamental and technical study of the stock’s performance. Past performance is not indicative of future results.
It is important to do your own research and always remember that your decision to trade depends on your attitude towards risk, your market expertise, the allocation of your investment portfolio and how comfortable you are with losing money. money. You should never invest more than you can afford to lose.
EasyJet is a major player in the European commercial aviation industry, offering low cost flights to customers in the region. The company is still struggling to recover from the hit it suffered during the pandemic. Its fundamentals appear solid as its long-term debt is at manageable levels.
That said, the virus situation and the Russian-Ukrainian conflict introduce a degree of uncertainty into the stock’s outlook, which may continue to affect EZJ’s valuation going forward, which should prompt investors to exercise caution.