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Will EasyJet’s share price recover from lockdown blows?

EasyJet's [EZJ] share price has suffered so far this year, as the coronavirus outbreak grounded planes and cancelled holidays around the world. However, the stock has also been one of the most-purchased since the coronavirus began, as investors bet on a strong return to business as usual once the outbreak is over.

Such a recovery for EasyJet’s share price will be no mean feat, though — with few customers and grounded planes, the airline has been burning through cash reserves for more than three months. Headwinds also include the danger of a second coronavirus spike, which could prompt further lockdowns around the world.

So, will we see EasyJet's share price regain altitude, or is there more turbulence ahead for the airline?

 

 

What's happening with EasyJet's share price?

EasyJet's share price has dropped 54.55% so far this year (through 14 July’s close). The coronavirus accounts for most of those losses, with the biggest nosedive coming between the 21 February and 18 March. As restrictions began to ease around the world in mid-May, however, EasyJet's share price rallied somewhat. The end of June saw another dip in the stock and it has been volatile since — oscillating between 650p and 720p in July so far.

54.55%

EasyJet's share price drop YTD 14 July

  

What could move EasyJet's share price?

Second coronavirus spike

Abby Glennie, of fund house Aberdeen Standard Investments, told the Telegraph that airlines like EasyJet could be hit again in the event of a second coronavirus spike. High cash reserves and little debt would no doubt help them to weather the storm. EasyJet has managed to tap circa £1.7 billion in funding, with another £200-350 million expected from final sale and leaseback transactions.

EasyJet’s share price could also be bolstered by the airline’s decision to drop threats of legal action against the UK government over quarantine rules following the release of a list of 73 countries deemed safe to visit. These include popular destinations such as Spain, France and Italy, with holidaymakers exempt from a 14-day quarantine.

However, access to these destinations remains conditional. If a second spike in cases meant that stricter quarantine measures were reintroduced, EasyJet's share price is likely to suffer.

 

Resilience during the outbreak

EasyJet has said it is remaining cautious and expects to fly at about 30% of its normal capacity until September. It doesn't expect passenger demand to return to 2019 levels until 2023.

In the airline’s half-year trading update, EasyJet reported that passenger numbers were down 3 million (-7.4%) in the six months to 31 March 2020. Group revenue was up 1.6% to £2.3 billion compared to the same period last year, while total group loss before tax came in at £353 million.

3million

Drop of passenger numbers in the 6 months to 31 March

  

So, time to buy EasyJet?

EasyJet's share price through 14 July’s close was 141.5% off its 52-week high, meaning it could be a good bet for bargain hunters.

In order to keep momentum, EasyJet will have to prove it has the cash to continue operating under the current, low levels of demand. Investors must also be wary of the danger of a second outbreak, which could see EasyJet's share price grounded once again.

Among the analysts tracking the stock on the Financial Times, EasyJet's share price carries an 850p target. Hitting this would see a 30.8% upside on the current share price (through 14 July’s close).

 

Market Cap£3.043bn
PE ratio (TTM)11.38
EPS (TTM)61.20
Quarterly Revenue Growth (YoY)1.7%

EasyJet share price vitals, Yahoo Finance, 15 July 2020

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