easyJet share price off course

easyJet will release its monthly traffic update on 6 July, and the share price is still in a tailspin since the first-half update in May.

easyJet logo on a plane engine
Source: Bloomberg

easyJet had ‘record performance’ in the first six months of the year according to CEO Carolyn McCall, and it was the first time since 2002 that the company registered a first-half profit. The announcement in May was largely positive, but the airline stated the French air traffic controllers’ strike in April would impact the annual numbers, and that is estimated to cost £25 million to the firm.

For the six months until 31 March, easyJet posted a profit of £7 million, compared with a loss of £53 million the previous year. The company previously gave a guidance of between a loss of £5 million and a profit of £10 million. Nearly 29 million customers flew with easyJet in the first half of the year, which is a 3.8% rise on the year. Airlines normally post a loss during the winter season, and then make up for it in the summer. easyJet has launched 12 new routes and aims to increase capacity by 6.2% in the holiday season.

As I previously stated, easyJet had the customer service edge over Ryanair, and now the Irish airline has made considerable strides to enhance its customer experience, it will impact on easyJet’s revenue. Ryanair’s new nice guy image will help them build up repeat business, and this is something easyJet has been doing well for years.

easyJet will announce its full-year numbers in November, and the market is expecting revenue of £4.67 billion and adjusted net income of £505 million. These forecasts represent a 3.3% rise in revenue and a 12% increase in adjusted net income.

The first-half numbers were well received, with revenue of £1.77 billion and adjusted net income of £5 million, against expectations of £1.77 billion and £1.23 million respectively.

Investment banks are bullish on easyJet, and out of the 29 ratings, 21 are buys, five are holds and three are sells. The average target price is £18.86, which is 19% above the current price. Equity analysts are also bullish on Ryanair, and out of the 27 recommendations, 22 are buys, three are holds, and two are sells. The average target price is £13.02, which is 6% above the current price.

easyJet’s share price has been pushing higher since 2012, but the sell-off since May is cause for concern. If the support at £15.20 can be held the resistance at £16 will be the target, and a move through it will make £17 the next target. A drop below £15.20 will bring £14 into play, and the next major support level below that will be £12.

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