EasyJet shares are down 66% YTD. Should I invest?

EasyJet shares are down 66% YTD. Should I invest?
Written by:
Stanko Iliev
17th October, 10:45
Updated: 17th October, 10:46
  • EasyJet is still a risky investment and the price could weaken even more
  • Q3 global company sales were down 99% from a year ago
  • EasyJet will probably survive the pandemic but the recovery will take years

EasyJet (OTC: ESYJY) shares have weakened from $19.94 to $5 in less than several months and the current price stands around $6.29. The upcoming period will be competitive for the airline industry as air travel remains restricted due to the Covid-19 pandemic.

Fundamental analysis: The recovery will take years

EasyJet operates as an airline carrier primarily in Europe, the company has a fleet of 331 aircrafts and also engages in the trading and leasing of aircrafts. According to some reports, the global flights were down by 26% from year-prior levels and the airline industry needs support from the governments.

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It seems something will get done to make sure that happens according to the UK policymakers because pandemic restrictions are cutting again the global flights. The next several months will be competitive for the airline industry and the price of EasyJet shares could weaken even more in the upcoming weeks.

EasyJet reported that Q3 global company sales were down 99% from a year ago. The negative results were impacted by the COVID-19 pandemic and the company announced that 727 of its UK-based pilots are at risk of losing the job.

Deutsche Bank explains that European travel recovery is not easy to fix and this industry is facing difficult months. EasyJet increased its revenue in 2019 to $6.15B from $6.10B in 2018 but these numbers will be difficult to achieve in the next two years.

If we compare total stockholders’ equity of $2.6B and the market capitalization of $2.77B, we can notice that this stock is not overvalued. Another useful information for potential investors is that this company has paid more than $1B dividends to its shareholders in the last four years and this number can be even bigger in the future.

With a $3B in cash reserves, easyJet will be able to survive the pandemic, but the recovery will take years. My opinion is that this stock is still a risky investment and the price of EasyJet shares could weaken even more in the upcoming weeks.

Technical analysis: The price could weaken even more in the upcoming weeks

When trading EasyJet shares, you should have in mind that the price could weaken even more in the upcoming weeks.

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $6 and $5, $8 and $10 represent the resistance levels.

If the price jumps above $8 it would be a signal to buy EasyJet shares and we have the open way to $10. Rising above $10 supports the continuation of the bullish trend and the next price target could be located around $15.

On the other side, if the price falls below $5 it would be a strong “sell” signal and we have the open way to $4.

Summary

The next several months will be competitive for the airline industry and the price of EasyJet shares could weaken even more in the upcoming weeks. COVID-19 cases in the US continue to rise while Europe is not faring any better with this pandemic. This is certainly not good for the airline industry and the price of this stock will be also connected with the global economic outlook.

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