The tourism industry is one of the most widely affected economic sectors as a result of the coronavirus outbreak. stocks appear to be fully acknowledging their valuations as concerns grow regarding the virus’s potential impact on global economic growth.
In this regard, EasyJet has not been left out of the massive sell-out that started at the end of February and continues to send stocks into what appears to be a heavy downward spiral.
One of the most crucial developments that analysts have considered in their EasyJet share price analysis is the recent extreme measures taken by Italy to limit the spread of the virus. These include fines for those who travel outside quarantine zones, the cancellation of popular events and the suspension of educational activities.
As a result, investors seem to be worried about how these measures could set a precedent throughout Europe that will deepen the already-devastating effect of the coronavirus on the airline’s activities and financials.
It is important to note that EasyJet is an airline that provides low-cost fares for European routes, which means that the company solely depends on passenger volume within the continent to generate revenues for its operations.
EasyJet shares are traded on the London Stock Exchange (LSE) and its current market capitalisation is £3.77bn. Additionally, here’s a summary of some of the most important stock market metrics for EasyJet shares:
- 1-Year Return: -13.29 per cent
- Reported EPS: 0.89p
- Dividend Yield: 4.63 per cent
- Price/Book: 1.29
- Price/Sales: 0.59
- P/E Ratio: 10.62
So let’s take a closer look into the company’s current financial and stock market situation with an EasyJet share price forecast from reputed sources within the industry...
EasyJet stock outlook
EasyJet share price started to tumble at the end of February when Italy, Turkey and other European countries started to impose more severe measures to stop the spread of the coronavirus. This scared investors about a potential chain of reactions that could affect travel and tourism activities throughout Europe in the short term.
Back then, EZJ’s price had progressively scaled up to nearly £1,550 but subsequently declined to £1,062.50 at the beginning of March as a result of these fears. Now the stock is traded at £990 and the freefall is not showing signs of stopping.
Trade EasyJet PLC - EZJ CFD
Day-to-day coronavirus news and developments continue to take their toll on the stock’s short-term performance and investors are now facing negative one-month returns of -34 per cent, -27.7 per cent for three-month holding periods, and -30.82 per cent YTD accumulated losses.
At its current level, the stock is trading 17.1 per cent above its 52-week low (£840) and 37.3 per cent lower than its 52-week high (£1,570), and it is also trading 21.7 per cent below its 50-day Simple Moving Average of £1,257.
Meanwhile, EZJ share price forecast is ranging from £1,000 to £1,845 based on information provided by Yahoo Finance after surveying nearly 23 different analysts regarding the potential next-12-month situation of the stock.
EasyJet latest financial information
The most recent financial report issued by EasyJet covered its Q1 2020 results, which reflected a promising beginning for its fiscal year after the company reported a 2.8 per cent increase in the number of passengers compared to Q1 2019 and a 9.7 per cent growth in passenger revenues during the same period.
Total revenues for Q1 2020 also showed a positive growth of 9.9 per cent compared to Q1 2019 mainly led by an 8.8 per cent growth in the airline’s revenue per seat, which ended up the quarter at £53.89.
It is important to note that when this report was released the company did not realise that the coronavirus would be such a disrupting element for its operations. This makes its outlooks and potential revenue forecasts doubtful, at least for the near future, until the crisis is averted.
Furthermore, the company appears to be well suited to withstand the impact of this temporary crisis considering its balance sheet shows a debt-to-assets ratio of 63 per cent, along with a positive net cash flow of £260m by the end of 2019 and a net debt of only £326m.
EasyJet share price forecast
Twenty-three analysts were surveyed by Yahoo Finance regarding EasyJet’s share price prediction. They appear to be optimistic, perhaps due to the potentially temporary nature of the coronavirus outbreak, which should or could be contained in the near future.
The highest price target for the stock was £1,845, while the lowest estimate (£1,000) puts the price of EasyJet near to its current market price of £990. On the other hand, the average price target estimated by these analysts was £1,479.74, which would yield a 49 per cent positive return if the stock reaches this level over the next 12 months.
EasyJet (EZJ): buy or sell?
Twenty-seven analysts surveyed by Yahoo Finance in February regarding EasyJet’s potential future performance appear to be inclined to rate the stock as a hold. This is probably after considering the temporary nature of current events that are affecting the price of the airline’s shares.
On the other hand, opinions on this matter seem to conflict, as at least 20 per cent of the analysts also consider that the stock will underperform its target, while nearly 15 per cent of them think this is the time to enter a position.
Furthermore, the following two elements seem to be the stronger drivers for the EasyJet share price forecast:
1. News and further developments on the coronavirus outbreak in Europe
The potential containment of the outbreak in the near future could result in a turnaround, as the company would be able to recoup some of the lost revenue during the following quarters. Analysts appear to rely on the temporary nature of the outbreak, even though there are no clear signs that the spread is slowing down.
2. Potential flight restrictions from certain countries
Italy’s hard restrictions can be the beginning of other large-scale travel bans imposed by European countries that could send the company into a dangerous path of declining revenues and potential losses.
According to the company’s most recent press release on Covid-19, EasyJet seems to be taking certain administrative and financial measures to contain the impact of declining passenger revenue from key markets including Italy and other countries.
Some of these measures include budget cuts in discretionary expenditures, the postponement of non-critical projects, along with recruitment, promotion and pay freezes across its entire network.
The bottom line
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