Stock of the day: EasyJet

There is a lot to like about EasyJet at the moment. EasyJet shares are trading up over 1% this morning after the low-cost airline released passenger data.

What: There is a lot to like about EasyJet at the moment. EasyJet shares are trading up over 1% this morning after the low-cost airline released passenger data. Passenger numbers are up 8.1% in November to 5.35 million. The group also reported that the load factor – which measures how full the planes are, was up 2.6% to 92.3%. On a 12-month rolling basis, passenger numbers were up 10.3% to 81.23 million whilst the load factor increased 1.7% to 92.9%. In a trading update last month, EasyJet reported a record quarter in the three months to 30 September. 

However, things haven’t always been so good. EasyJet has been hit over the past few years with decreased demand for short haul flights, terrorism concerns, falling consumer confidence impacting in spending. However, the strong numbers have been as a result of several factors coming together and a sound strategic plan. 

Firstly, EasyJet has been able to take advantage of the cancellation of hundreds of Ryanair flights after the EasyJet rival miscalculated pilots annual leave. Furthermore, there has also been a rising passenger demand in general, which has contributed to stronger numbers. 

Secondly, thanks to the demise of Air Berlin, EasyJet has been able to announce) dozens of new domestic routes across Germany, as it looks to take on German rival Lufthansa. The acquisition of Air Berlin sits well with its strategy of seeking to acquire top positions in Europe’s major airports. 

The demise of other industry rivals such as Monarch and Alitalia has also been beneficial to EasyJet, lower competitor numbers can only be a good thing. 

Looking ahead, industry trade body, International Transport Association reported yesterday that it expects airlines net profits to increase in 2018 to £28.7 billion from £25.8 billion in 2017, as a result of higher airfares and growing demand. Finally, EasyJet has maintained a strong balance and continues to offer a respectable dividend yield of 3.7%. Given that inflation is sitting at 3%, the dividend offers a return in real terms. In this respect it is also more attractive than rivals, Ryanair and Wizz, which don’t offer dividends. 

How: The share price is currently trading at 1443. It is up 8% over the past month and 6% over the past 6 months. The stock continues to trade comfortably above its 200-day SMA and 50 day SMA confirming the bullish trend.

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