EasyJet share price analysis and outlook

EasyJet's Q3 2024 financial performance

EasyJet, the British low-cost airline, at the end of July reported a robust financial performance for the third quarter of 2024. The company saw a significant 16% increase in quarterly profit before tax, reaching £236 million for the period ended 30 June 2024. This positive result was driven by an 8% growth in passenger numbers and a 1% increase in revenue per seat year-over-year (YoY).

The airline's package holiday business, easyJet Holidays, has been a particularly strong performer. It reported an impressive 49% jump in profits to £73 million, supported by a substantial 33% growth in passenger numbers. This success in the holiday segment demonstrates easyJet's ability to diversify its revenue streams effectively.

Despite these encouraging figures, easyJet's share price has remained relatively stable over the past year. The stock has been trading in a range between 400.00–600.00 pence (p) per share and is currently flat year-to-date (YTD). This stability in the face of positive results raises questions about investor sentiment and market expectations.

EasyJet's financial health appears robust, with a reported net cash position of £456 million as of 30 June 2024. This represents a significant improvement from the £146 million reported at the end of March, indicating strong cash generation during the quarter.

Future outlook and capacity expansion

Looking ahead, easyJet has provided an optimistic outlook for its future performance. The company expects its full-year 2024 capacity to reach approximately 100 million seats, signalling confidence in continued demand growth. This expansion in capacity is supported by the completion of all 16 aircraft deliveries expected for the year, with the final one received in July.

EasyJet's CEO, Johan Lundgren, attributes the strong third-quarter (Q3) performance to an increasing number of customers choosing easyJet for its "unrivalled network of destinations and value for money". This customer preference is reflected in the strong summer bookings, with 69% of seats for the fourth quarter (Q4) already sold as of the end of June.

The company's forward bookings are showing positive momentum, with 1.50 million more peak summer seats currently booked compared to the same point in 2023. This 1 percentage point increase in bookings suggests that easyJet is well-positioned to capitalise on the peak travel season.

Revenue per seat in the fourth quarter is forecast to continue the positive trend seen in Q3. Additionally, easyJet Holidays is projected to deliver over £180 million in full-year profit, representing an impressive 48% YoY growth.

Analysing easyJet's share price performance

Despite the positive financial results and optimistic outlook, easyJet's share price has remained relatively stable. This disconnect between financial performance and share price movements could be attributed to several factors.

One possible explanation is that the market had already priced in expectations of strong performance, leading to a muted reaction to the results. Alternatively, investors may be taking a cautious approach due to broader economic uncertainties or specific challenges facing the airline industry.

It's worth noting that easyJet's share price stability could also be seen as a positive sign of resilience in a volatile market. The company's ability to maintain its share value while delivering strong results may indicate investor confidence in its long-term prospects.

Investors and analysts will be closely monitoring easyJet's performance in the coming months to see if the positive financial trends translate into share price appreciation. Factors such as fuel costs, which the company expects to remain flat YoY in the second half, will be crucial in determining future profitability.

EasyJet's strategic initiatives and market position

EasyJet's strong performance can be attributed to several strategic initiatives. The company has been focusing on expanding its network of destinations, which has proven attractive to customers seeking value for money in their travel options. This strategy has helped easyJet maintain its competitive edge in the low-cost airline market.

The success of easyJet Holidays demonstrates the company's effective diversification strategy. By leveraging its airline operations to offer package holidays, easyJet has created a significant additional revenue stream. The 49% profit growth in this segment suggests that this strategy is paying off and could be a key driver of future growth.

EasyJet's commitment to fleet modernisation, as evidenced by the completion of its aircraft deliveries for the year, positions the company well for future efficiency gains. Newer aircraft typically offer better fuel efficiency and lower maintenance costs, which could contribute to improved profitability in the long term.

The company's strong cash position provides financial flexibility, allowing it to invest in growth opportunities or weather potential economic headwinds. This financial strength could be a key factor in maintaining investor confidence, even if it's not currently reflected in significant share price appreciation.

EasyJet analyst ratings

According to London Stock Exchange Group (LSEG) Data & Analytics, analysts are rating easyJet as a buy with 3 strong buy, 12 buy and 5 hold ratings with a mean long-term price target at 648.53p, around 27% above current levels (as of 25 September 2024).

According to TipRanks, the easyJet share is also rated as a buy (7 buy and 3 hold) and a SmartScore rating of outperform at 8 (as of 25 September 2024).

Technical analysis of the easyJet share price

The easyJet share price, up 3% YTD following a 25% rally from its early August low, seems to be stalling below its 200-week simple moving average (SMA) at 537.60p. Together with the March, April and May 2023 as well as last week’s highs at 527.00p to 534.80p, it represents a formidable resistance area for the easyJet share price.

EasyJet weekly candlestick chart

Were the 527.00p to 537.60p resistance area to be breached, the January and April highs at 582.20p to 591.00p would be back in sight.

Support is seen around the 502.20p July peak. While the October 2022 to September 2024 uptrend line and the early August low at 415.00p to 404.70p underpin, the long-term uptrend remains intact.

Challenges and opportunities in the airline industry

While easyJet's results are encouraging, the airline industry faces several challenges that could impact future performance. Fuel costs remain a significant concern for all airlines, and while easyJet expects these to remain flat in the short term, any significant increases could pressure profitability.

The ongoing recovery from the Covid-19 pandemic continues to influence travel patterns and demand. While easyJet's strong bookings suggest robust recovery, any new travel restrictions or changes in consumer behaviour could impact future performance.

Competition in the low-cost airline sector remains intense, with rivals also expanding their networks and offerings. easyJet will need to continue innovating and improving its services to maintain its market position and attract customers.

However, these challenges also present opportunities. The shift towards value-focused travel could benefit low-cost carriers like easyJet. Additionally, the company's strong financial position could allow it to capitalise on potential market consolidation or expansion opportunities that may arise.

How to invest in easyJet shares

If you're considering investing in easyJet shares based on this analysis, here's a step-by-step guide to get started:

1. Conduct thorough research on easyJet and the airline industry. Consider factors such as the company's financial health, growth prospects, competitive position, and industry trends
2. Open a share dealing account with a reputable broker like IG. This will allow you to buy and hold easyJet shares
3. Use the trading platform or app to search for easyJet shares. The company is listed on the London Stock Exchange under the ticker EZJ
4. Decide how many shares you want to buy or how much money you want to invest. Consider your investment goals and risk tolerance when making this decision
5. Place your trade to buy easyJet shares. You can typically choose between a market order (buy at the current market price) or a limit order (buy only if the price reaches a specified level)

Remember, investing in shares carries risks, and the value of your investment can go down as well as up. Always invest within your means and consider seeking advice from a financial professional if you're unsure.

By following these steps and staying informed about easyJet's performance and the broader airline industry, you can make more informed investment decisions. Whether easyJet's share price will reflect its strong financial performance in the future remains to be seen, but the company's robust results and positive outlook suggest it could be an interesting stock for investors to watch.