No acceleration on easyJet’s horizon

Investors aren’t getting carried away with half-year relief.

Investors aren’t getting carried away with half-year relief.

The shares briefly surged 7% higher for their second-best day of the year. They were last up about 3.7% and losing 8.7% this year. Nimble scheduling to minimise the impact of strikes and freak weather is now set to lower seat costs, which is better than the previous expectation that those would be unchanged. There were few further surprises. The 7.3% revenue jump on the year had an FX tailwind. The typical loss at this point in the travel year left easyJet further offside than expected—£275m in the red vs. minus £18m at H1 2018. Underlying revenue was still higher, but unexpected hits included drones, and cost inflation. Ahead, the group warns that currency effects will become a headwind into year end, and the fuel bill will rise to between £25m-£60m. That will take a hefty chunk out of a savings forecast at £100m. Although easyJet’s 2019/20 average fuel hedge still looks more favourable than Ryanair’s, longstanding pressures and persisting disruption underscore the lack of leg room the UK carrier has to lift growth in the medium term. Investment in fleet and long-term profit growth projections are still easyJet’s key investible points. With headline outlook unchanged and no hints on potential outperformance, share price recovery this year, if any, looks set to remain sluggish.

Chart thoughts

EZJ looks to be grinding out a bottom from, pretty much, a year of selling off cycle highs last May and July. A falling wedge of similar length could presage eventual continuation of the September 2017-July 2018 trend to cycle highs. But first, visible impediments must be surpassed, beginning with the declining line connecting successively lower highs since July. Above that, and 1237p 200-day moving average, this year’s 1365p peak could be the decider of an extended recovery. In the event of a stall, 975p-847p would be where buyers hope for support.

Chart: easyJet – daily

Source: City Index


Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.