- EasyJet is expected to make a return to the FTSE 100 index this week.
- The budget airline was previously demoted from the index in June.
- Analysts are not too convinced of EasyJet's ability to sustain its inclusion in the FTSE 100.
- Hargreaves Lansdown says there are multiple challenges for budget airlines in the time to come.
- FTSE 100 index is forecasted to remain capped at 7,440, ahead of the UK's general election.
Promotion to and relegation from the FTSE 100 index has been a trend for various stocks in the past. Aberdeen based, multinational energy services company was promoted to Footsie 4 times in the past 11 years, with it failing to sustain its inclusion every time. Hikma Pharmaceuticals, on the other hand, has seen four promotions to the FTSE 100 index since 2015 while it retained its last promotion earlier in 2019 and has thus far not been demoted from the index.
EasyJet Was Demoted From FTSE 100 In June
With the index set to shuffle this week, budget airline, EasyJet, is dreaming of returning to its place in FTSE 100 index. 2019 started as a tough year for the budget airline. A decline in the number of passengers and consequently the ticket prices had seen the share prices drop to a five-year low for EasyJet at the end of 2019’s first half. Currently trading at 1,338 GBX with a market cap of $5.31 billion, the airline is expected to be promoted to Footsie while Just Eat has been placed at risk of relegation. Just Eat debut on the FTSE 100 index only a year ago.
While EasyJet may make a return to one of the most widely known indices of the financial markets, as per a thorough evaluation of its performance, the analysts are not convinced that it will be able to sustain the promotion in the long run, despite the stock printing a year-to-date high of around 1,355 GBX last week.
Hargreaves Lansdown Highlights The Upcoming Challenges For The Budget Airline
According to Hargreaves Lansdown, EasyJet may have printed upbeat full-year results earlier in November but the macroeconomic factors such as the approaching general election and UK’s imminent departure from the European Union, continue to weigh on the consumer sentiment. Environmental concerns and broader regulations, the financial services company added, can be expected to pose a new challenge for the cheaper airlines in the time to come.
As per the financial experts, optimism for EasyJet lies in the fact that the rules regarding a listed company’s relegation from Footsie are rather lenient. Businesses remain listed on the index as long as they lie in the top 111 most valued companies. A drop further than the 111th position marks the demotion of the business from the FTSE 100 index.
Having closed the last week at 7,362, technical analysts have forecasted the FTSE 100 index to keep under 7,440 level ahead of the UK’s upcoming general election. Strong near-term support for Footsie is located at 7,350 level.