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The easyJet (LSE: EZJ) share price was already struggling before the recent market meltdown. Inevitably, things have only got worse.
After a bleak few years for the travel sector, 2024 looked like it might mark a turning point. It certainly was for rival FTSE 100 carrier International Consolidated Airlines Group, whose shares doubled last year as international travel roared back.
Yet easyJet shares remained firmly on the tarmac, with revenues and profits lagging behind. The budget airline’s core market is Europe, and the continent’s economy has been under something of a cloud.
EasyJet’s Q1 update, published on 22 January, didn’t offer much cheer. While passenger numbers rose 7%, and group revenues climbed 13% to £2.04bn, other metrics disappointed.
Can this FTSE 100 stock fly again?
Revenue per seat came in just under expectations at £74.36 (analysts were hoping for £75), and the airline still posted a pre-tax loss of £61m. That was a step forward from the £126m loss a year earlier, but not enough to lift the mood.
By contrast, IAG looked better placed to benefit from boom in transatlantic demand, thanks to subsidiary British Airways. But that was before Donald Trump’s new tariffs rattled markets.
Over the past month, the easyJet share price has dropped 12%. Interestingly, IAG shares have fallen twice as much — down 25%. That’s partly because investor expectations were higher, and the disappointment more acute.
Hopes of a transatlantic travel surge are quickly fading, as Trump takes a more isolationist stance on trade. A US recession won’t help. Nor will a global one.
Over 12 months, easyJet shares are down 24%, while IAG is still up 35%, reflecting how well it was performing before the latest turbulence.
If I had a direct line to Trump and he told me he was scrapping every tariff tomorrow, IAG would be the first FTSE 100 stock I’d buy. If today’s worries do subside, it could soar.
But I don’t have that hotline — and I doubt this crisis will blow over that easily. So while I’m cautious on IAG for now, I’m seriously tempted by easyJet.
High potential growth but high risk too
Its European focus might offer some shelter from global trade rows, though it won’t be without turbulence. Increased Middle East tensions or a squeeze on household budgets could hit short-haul travel hard.
I’m also intrigued to see whether the growing pushback against overtourism in Europe dents demand for cheap, short-hop breaks.
Even so, easyJet shares look strikingly cheap, trading on a price-to-earnings ratio of just 7.1. That’s low for a business with a strong brand, solid balance sheet and a fast-growing holiday arm.
The 20 analysts covering the stock have a median one-year forecast of just under 695p. If that proves right, we’re talking about a stunning 60% jump from today’s level.
Now, forecasts are never to be relied upon — and especially not in times like these. Many were likely made before recent market shocks.
But to me, that suggests there’s potential here and easyJet is worth considering, but with one big proviso. It still faces plenty of bumps. As does every single stock today.
