EasyJet share price soared after Ryanair earnings but risks remain

By:
on Nov 6, 2023
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  • EasyJet stock price has bounced back in the past few days.
  • The shares continued rising after the strong earnings by Ryanair.
  • Aviation demand is rising but there are still significant fuel cost risks.

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The EasyJet (LON: EZJ) share price continued its rebound on Monday as traders cheered the latest Ryanair earnings. The stock rose to a high of 408.8p, much higher than last month’s low of 350p. It has dropped by more than 24% from the highest point in 2023.

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Aviation industry tailwinds

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EasyJet and other companies in the airline industry recovered modestly after the latest Ryanair results. The company, which runs the biggest regional airline in Europe, said that its load factor jumped to 95% in the first half-year report. 

Its revenue jumped to over €8.58 billion in the period, up from the €6.62 billion it made in the same period in 2022. Its profit also jumped to over €2.18 billion, signaling that the company and the industry are doing well.

As a result, the company said that it would resume paying back its dividends. It will spend €400 million in its maiden dividend payments. However, the company still warned about headwinds in the region such as the relatively higher fuel costs. 

Ryanair, as the market leader in Europe’s aviation industry, tends to set the tone for other companies in the region. This explains why EasyJet, IAG, Lufthansa, and Wizz Air stocks jumped sharply also.

Ryanair’s results mirrored those of EasyJet. In its earnings report in October, EasyJet said that its passenger growth expanded by 8% in the fourth quarter. Its profit before tax came in at between £650 million and £670 million. For the year, PBT was between £440 million and £460 million. 

The company, which has one of the best balance sheets in the market, also started paying back dividends. The initial payout ratio was 10% of its profit after tax (PAT). This ratio will then jump to 20% of PAT in the coming year.

The risk that Ryanair and EasyJet face is fuel costs. While jet fuel price has dropped in the past few weeks, there is still risk that it will bounce back in the coming months. Some analysts believe that crude oil could hit $150 in 2024.

EasyJet share price forecast

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EasyJet share price

EZJ chart by TradingView

The daily chart shows that the EZJ stock price has been in a strong bearish trend in the past few months. The stock peaked at 534.6p on May 18th and bottomed at 350p in October. It remains below the 50-day and 100-day Exponential Moving Averages (EMA).

Now, the stock has bounced back and retested the crucial resistance point at 409p, the lowest point on August 25th. A break and retest is one of the bearish sign. 

Therefore, the outlook for the stock is still bearish for now, with the next support to watch being at 380p. A move above the resistance at 410p will point to more upside.

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