Stock of the day: EasyJet
City Index December 6, 2017 8:00 PM
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.
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.