Up, up and away for easyJet

Increased passenger numbers, low oil prices and mishandled problems by competitors mean that the majority of analysts rank the airline a buy ahead of its first quarter results.

easyJet plane
Source: Bloomberg

On Tuesday 27 January easyJet is due to post Q1 results. Considering the most recent air passenger numbers, the company has confirmed optimism is high. On 7 January the low cost airline announced that in 2014 it transported 65.35 million passengers, an increase of 6.5% from 2013. It also announced that December 2014 saw it transport 4.63 million, a-year-on-year increase of 3.2%.

easyJet’s biggest cost, as with all airlines, is fuel, and the spot market has been particularly kind to this sector over the last six or seven months. Oil prices have halved during this period and comments coming from many of the OPEC nation’s oil ministers would point towards these low levels being in place for some time.

One possible cloud on the horizon is the attention that management has been attracting from struggling companies in the FTSE. The company already lost former CFO Chris Kennedy to ARM Holdings, while rumours have recently been circling that CEO Carolyn McCall is also a target.

Institutional support for the airline is very strong at the moment, however, with 20 firms ranking the airline a buy, five a hold and only two a sell. The average price target for the firm over the next twelve months is 1806p, which still offers a 9.7% premium on the current market levels. Much of this optimism has been borne out of mismanagement by competitors – namely Air France-KLM – of strikes and disruption to scheduled timetables over the summer.

Recent dips below the 1600p level have seen buyers materialise. Coupled with the supportive 50-day moving average, we should see easyJet shares test December highs at 1762p.

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