Financial Trading Blog
Stock of the day 18/07/2016 – easyJet PLC
Having slipped form £17.50 to £15 by the middle of February easyJet had settled into a fairly consistent trading bracket for much of the first half of the year, bouncing between £14 and £16 despite the litany of events that caused the travel and leisure sector to take a hit during that period. Yet that all changed on the 24th June, with Britain’s decision to leave the EU causing easyJet to plunge 36% in the space of 2 trading sessions. That pushed the company to 38 month lows of £9.80, a price it has only recently recovered from; easyJet now sits at a current trading price of £11.39 (IT-Finance.com, 18/07/2016).
(Source: IT-Finance.com 18/07/2016)
Even before the Brexit result easyJet was looking weary, the series of terror attacks in holiday hotspots like France, Belgium and Turkey weighing heavy on the company’s performance (though, of course, that is the most insignificant aspect of those tragedies). Back in mid-May the firm revealed its half-year figures, slipping to a pre-tax loss of £24 million from a £7 million profit the year before as revenue per seat fell 6.6%.
Investors reacted kindly to that mid-year report, largely because easyJet stated it would be paying out half of its annual profits to shareholders. The reaction was understandably less positive to the company’s post-referendum profit warning, however. On the 27th June easyJet revealed that revenue per seat in the third quarter would drop around 8.6%, with a £28 million fall in profits for the period, noting that even before the Brexit news May and June had been ‘extremely challenging’ thanks to French air traffic controller strike-inspired cancellations.
So, easyJet faces an unenviable task on Thursday with its Q3 statement. First it will have to confirm the rather ugly figures it announced at the end of June (though that does leave room for a pleasant surprise for investors). Secondly the company will have to more substantially update on the impact of the Brexit, even if data is light on the ground in regards to its long-term effects.
easyJet PLC has a consensus rating of ‘Hold’ alongside an average target price of £17.67.
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