EasyJet share price: stuck in a bear market as dividends return

EasyJet (LON: EZJ) share price plunged to the lowest level since January as the recent sell-off gained steam. The stock retreated to a low of 402.3p on Thursday, ~23% below the highest point this year. It has moved into a deeper bear market as cost concerns remain.

EasyJet financial results

EasyJet stock price came into the spotlight after publishing its Q4 and full-year trading statement on Thursday. The results showed that the company’s profit will be between £650 and £670 million in its Q4. 

Its profit before tax (PBT) will be between £850 and £870 million in the second half of the year. It also expects that its next quarter capacity will grow by 15% You. Most importantly, EasyJet decided to return to its dividend policy.

It will start with a payout ratio of 10% and then boost it to 20% in the next financial year. The management believes that it can still continue boosting its shareholder returns in the next few years.

EasyJet share price dropped because of the ongoing profitability risks as the cost of fuel jumps. Jet fuel price has been in an uptrend as the price of crude oil continues bouncing back. Delta Airlines also warned about these challenges in its results on Thursday.

Still, a case for investing in EasyJet can be made. First, it is a welcome move that the company plans to reward shareholders with dividends. Unless a major crisis happens, I suspect that this dividend growth will continue for a while.

Second, EasyJet is continuing to mordernise its operations. It has placed hundreds of orders from Airbus. The new A320s will have more sitting capacity, which is a positive thing, especially in the high season.

Third, EasyJet is a well-known brand that has one of the strongest balance sheets in the industry. Data shows that it has over 3.4 billion in cash, £10.5 billion total assets, and £8.6 billion in liabilities.

EasyJet share price forecast

EasyJet stock price has been under intense pressure in the past few months, as I wrote in this article. The situation worsened on Thursday after the company published strong earnings. As it dropped, it moved below the key support at 408.6p, the lowest swing on September 28th and August 25th. 

The stock has remained below the 50-day moving average and the crucial resistance level at 440p, the lowest swing on March 20th. Therefore, the shares will likely continue falling as sellers target the next key support at 380p. This view is in line with my previous EasyJet forecast.