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EasyJet operates more than 1,000 routes in over 25 countries and is a popular airline for many travellers looking to travel quickly and easily. But for investors, the airline industry has not always been easy to navigate.
The industry can be very volatile, depending on numerous factors that are currently prevalent in the UK including Brexit, strikes, and even weather. Intense competition is a permanent feature of the industry. Many airlines offer similar services, and often the ticket pricing does not vary significantly. Ryanair remains a major rival. With these factors in play, investors are left wondering whether this is a stock worth avoiding.
Judging by recent results, EasyJet seems to be in a strong position to fend off Ryanair. Recent quarter results showed almost a 10% increase in passengers, resulting in around 14% increase in revenues. Forecasted figures indicate that further growth may be on the cards, with a projected 7% increase in passenger capacity leading to stronger profit expectations (approximately £400m). The positive results were very encouraging for investors, leading to a 3.5% increase in share price. For new investors, the fear is that the time to buy may have passed.
Before the most recent share price increase, certain fluctuations were noticeable but unsurprising. Trading as high as 1,900p in mid-2015, rising fuel costs and Brexit weighed heavy on the share price. Nearly a year later, it dropped nearly 44%. Politics continued to play a role, with the Brexit threat becoming more prevalent. Not to mention, overcapacity started becoming an issue. The share price fell again, underperforming the FTSE 100 by almost 40%. The drop slowly attracted investors, as bargain hunters began placing positions hoping for an uptick in performance – coming to fruition in 2019.
The reason behind the positive news? Cost control.
The positive quarter results may demonstrate the efficiency to which easyJet controls its costs. By focusing on cost control, a strong balance sheet has led to a positive price trend. As of September 2019, the share price stands at 1,007p. The merits of buying Easyjet is still unclear for many investors. However, it is undeniably one of the airline success stories of recent decades, and with a lean balance sheet and strong market share, Easyjet seems to be flying again.
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