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What next for EasyJet’s share price as omicron travel restrictions emerge?

EasyJet’s [EZJ] share price lost considerable altitude after news of the omicron coronavirus variant emerged. Between Thursday 25 November and Tuesday 30 November, the stock had plummeted 13% as some investors looked for the emergency exits.

Despite recovering some altitude to close Friday at 528.20p, the stock could still be a bargain. But that depends on what happens as countries around the world respond to the omicron variant as more information emerges.

 

 

 

What’s happening with EasyJet’s share price?

It’s no surprise that news of the omicron variant has hit airline stocks. The sector was badly hit during the pandemic as travel was restricted, planes grounded and staff laid off. This resulted in considerable cash burn and calls for government support.

EasyJet’s share price may have recovered slightly since hitting a year low of 496.5p on 30 November’s close, but whether it stabilises and recoups all of the losses remains to be seen.

Yet, EasyJet’s share price is still well off pre-pandemic levels. On 16 February 2020 the stock had closed at 1,508.5p, by the end of March that year it was trading hands for 475p as countries across the globe entered lockdown.

Since that February high, the stock is still down 60% and while the vaccination rollout saw the stock rally in the first half of 2021 to top out at 1,036p on 7 May, EasyJet’s share price has since slumped 51%.

51%

Price drop of EasyJet shares since 7 May

 

 

Bearish outlook for EasyJet’s share price?

Even before omicron EasyJet’s share price was having a tough November. Headwinds for the stock included the impact of the delta variant on travel and EasyJet’s plans to add to its debt pile through a £1.2bn rights issue to help it through what’s proving to be a tough winter.

The timing of EasyJet announcing a billion-pound loss for the second year running couldn’t have been worse. For the year ending September, EasyJet posted a £1.13bn loss, which is at least better than the £1.27bn loss from the previous year.

The airline suggested that despite bookings for the first half of 2022 being up from pre-pandemic levels the outlook remained uncertain. It also admitted that omicron had already led to a ‘softening’ of demand and that it had cut some flights in anticipation.

A government announcement over the weekend that arrivals to the UK will have to take pre-departure COVID tests will do little for either EasyJet or the battered travel industry

“Airlines can’t seem to catch a break. News of new Covid variants, and the potential for further travel restrictions, makes it incredibly difficult to predict trading patterns from here,” said Sophie Lund-Yates of Hargreaves Lansdown. “There is no getting away from the fact [EasyJet has] further to climb and the coming months will be patchy at best.”

“Airlines can’t seem to catch a break. News of new Covid variants, and the potential for further travel restrictions, makes it incredibly difficult to predict trading patterns from here...There is no getting away from the fact [EasyJet has] further to climb and the coming months will be patchy at best” - Hargreaves Lansdown's Sophie Lund-Yates

 

 

Where next for EasyJet’s share price?

The threat of omicron raises the spectre of more heavy losses should travel restrictions come into place. EasyJet is also caught in the position of no longer being a bargain service like Wizz air, but not a premium offering like BA.

Still, bargain hunters could be interested in EasyJet’s share price seeing as it is at its lowest level for 12 months. However, with much unknown about omicron and the protection offered by current vaccines, investors could see some near-term turbulence before a turnaround in the stock’s fortunes.

Disclaimer Past performance is not a reliable indicator of future results.

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