easyJet (LSE:EZJ) shares were decimated during the pandemic. Since then, however, short-haul travel markets have staged a solid comeback. And in the group’s latest third-quarter trading report, pre-tax profit rose a further 16% in the three months to June.
A common investment tip is to always buy low. And with Covid-19 pushing EasyJet’s share price to its lowest level in over a decade, the question is: how much money could investors have made?
Utilizing the numbers
Following the Covid outbreak, share prices collapsed rapidly across the board, triggering a stock market crash. And EasyJet was no exception. At the start of February 2020, shares were trading at around 1,200p. By mid-March, they had plummeted to below 350p – a drop of 70%.
Since then, however, the situation has clearly improved. Borders are no longer closed, passenger numbers have recovered to pre-pandemic levels and demand appears to be increasing. So how has EasyJet stock performed?
Investors who bought the stock at its lowest point with £10,000 now have £12,342 – a return of 23.4%. That’s certainly not terrible, but considering FTSE100 With a total profit of almost 50% over the same period, EasyJet is lagging significantly behind the overall market.
Earlier this year, management paid out a dividend for the first time since 2020. But that’s nowhere near enough to close the performance gap. So what’s going on?
Inspection of the damage
The global lockdowns led to a huge pent-up desire to travel. This is hardly surprising, as families were at home for months. And when travel markets fully reopened in 2022, another surge in travel activity followed.
Thanks to this momentum, EasyJet got back on its feet financially and began to repair the damage caused by Covid. But the tailwind of recovery cannot last forever. And according to the group’s latest results, the travel market appears to be weakening.
To add to the uncertainty, CEO Johan Lundgren announced he will step down next year. In the meantime, several rivals have begun acquisitions, making competition in Europe more intense. With rival short-haul airlines like Lufthansa at the mercy of larger sums of cash, growth will inevitably become more difficult.
Despite the improved market situation, investors still do not seem to be convinced that EasyJet can deliver.
A buying opportunity?
Despite the headwinds, EasyJet has some encouraging results. In July, bookings for the fourth quarter ending in September were at 69 percent of capacity, slightly higher than a year ago, although overall capacity is up 7 percent. This is particularly encouraging as this is the time when the company is experiencing peak travel activity.
Meanwhile, bookings for the last three months of 2024 have also increased compared to the previous year: 20% of the total capacity is occupied.
The big question, however, is what price those tickets were sold for. With a price-to-earnings ratio of just 5.9, EasyJet shares look like a dirt-cheap bargain. However, if returns from ticket sales start to fade, investor pessimism may be warranted, so I’m keeping this company on my watchlist for now.
The post “If I had invested £10,000 in EasyJet shares during the pandemic, I would have this much now!” appeared first on The Motley Fool UK.
Further reading
Zaven Boyrazian does not own any of the stocks mentioned. The Motley Fool UK does not own any of the stocks mentioned. The views expressed in this article about the companies mentioned in this article are those of the author and as such may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.
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