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The easyJet (LSE: EZJ) share price has soared 20% over the last month, but today’s (22 May) half-year results have taken some of the wind out of its wings.
After such a sharp climb, this morning’s slight dip of around 1.5% isn’t surprising. Over the last 12 months, the shares are up 21%, but it’s been a bumpy ride.
That’s often the case in the airline sector, which remains exposed to everything from global conflict to weather events and political turmoil.
Still, I’ve long thought easyJet looked like a potentially strong recovery play. For those who bought in early, the recent rally will feel like validation. The big question is whether there’s more fuel in the tank.
Earnings potential
Today’s numbers cover the six months to 31 March 2025. The seasonal winter loss before tax came in at £394m, which was in line with expectations and only slightly worse than last year’s £350m. The timing of Easter this year distorted comparisons, the adjusted figure is said to be £50m better year on year.
Encouragingly, its easyJet Holidays operation continues to fly. It posted a £44m profit, up £13m on last year.
The company expects to deliver full-year profits of £703m. Bookings are healthy, with 80% of seats sold for Q3 and 42% for Q4m. Demand looks strong going into the busy summer months.
Capacity grew 12% in the first half, while crew productivity and aircraft usage improved. Operating costs fell, with fuel cost per available seat kilometre (CASK) down 8%.
The market may have been underwhelmed by today’s confirmation that winter losses are still substantial, but I can see signs of underlying progress.
The shares still look decent value, with a trailing price-to-earnings ratio of just 9.2. That’s tempting for a company expecting £1bn in annual profit in the medium term.
Risks on the radar
That said, the risks aren’t hard to spot. Airlines are acutely sensitive to economic cycles, and as a budget carrier, easyJet struggles when passengers feel poorer.
Inflation remains sticky, as we discovered yesterday, and that hits both consumer sentiment and operating costs.
Today’s share price reaction suggests some profit-taking and caution around the rest of the booking season. With a big part of the summer yet to be sold, easyJet still has work to do.
Still worth watching
Even so, I think there’s a lot to like. I’m not alone. The 17 analysts offering one-year share price targets see a median of 684p. From today’s 557p, that would be a gain of more than 23%. Add the 2.2% trailing yield, and that’s a potential 25% total return. Forecasts are just guesswork, of course.
Of the 18 analysts giving a stock rating, 11 say Strong Buy and another two say Buy. Not a single one says Sell.
Investors considering this stock might want to hold off a little to see if the price settles after such a strong run. But I still think easyJet is worth a look for long-term investors who want exposure to a growth-focused sector, as long as they’re prepared for turbulence en route.
