easyJet Stock: Strong 10% Return Beats S&P 500, Growth Opportunities Persist Despite Risks

seekingalpha10-04

easyJet has shown strong performance with an 11% revenue increase and a 16% rise in pre-tax profit, driven by cost efficiency and growth in holiday revenues.Risks include fuel price fluctuations, ...

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overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\neasyJet Stock: Strong 10% Return Beats S&P 500, Growth Opportunities Persist Despite Risks\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-10-04 23:49 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4725040-easyjet-strong-10-percent-return-beats-sp-500-growth-opportunities><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>easyJet has shown strong performance with an 11% revenue increase and a 16% rise in pre-tax profit, driven by cost efficiency and growth in holiday revenues.Risks include fuel price fluctuations, ...</p>\n\n<a href=\"https://seekingalpha.com/article/4725040-easyjet-strong-10-percent-return-beats-sp-500-growth-opportunities\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"ESYJY","symbol_name":"easyJet Plc","start_time":0,"source_url":"https://seekingalpha.com/article/4725040-easyjet-strong-10-percent-return-beats-sp-500-growth-opportunities","article_id":"2472196977","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2151183438/image_2151183438.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2472196977","pubTimestamp":1728056971,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"For easyJet, the risks are the same for any other airline. Fuel price and demand fluctuations are the primary risks and currently airplane shortages also add risks. easyJet flies to Tel Aviv, so in its route network there is some minor exposure to the tensions in the Middle East, but generally conflict is not good for sentiment for airline investment. On fuel costs, the company has a hedging strategy in place to catch off some risk on fuel price fluctuations. Opportunities for easyJet are the absorption of bigger A321neo airplanes which are not only more fuel efficient but also offer more seats and drive down cost items such as maintenance and crew costs per seat while offering higher potential. Holiday revenues are also a growth opportunity for the airline, but it should be noted that as Ryanair  has seen that Jet2.com  and easyJet are successful in the package holiday business they are also considering entering that market. If that happens, competition will intensify. Is easyJet Stoc","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"ESYJY":"easyJet Plc","EJTTF":"easyJet Plc","BK4008":"航空公司"},"translate_title":"易捷航空股票：10%的强劲回报率超过标准普尔500指数，尽管存在风险，增长机会依然存在","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EJTTF":0.9,"ESYJY":0.9},"content_text":"easyJet has shown strong performance with an 11% revenue increase and a 16% rise in pre-tax profit, driven by cost efficiency and growth in holiday revenues.Risks include fuel price fluctuations, demand changes, and minor exposure to Middle East tensions, while opportunities lie in fleet upgrades and expanding holiday revenues.Despite a modest downward revision in FY24 price target to $13.75, easyJet remains a buy due to significant upside potential and undervaluation.The stock is undervalued with stable revenues, reduced costs, and growth in the Holidays business, maintaining a buy rating despite airline stock volatility.   Francois NAVARRO-GUY/iStock Editorial via Getty Images In June, I covered easyJet and assigned a buy rating to the stock, and since then, the stock has performed well with a 10.4% return compared to a 4.3% return for the S&P 500. In this report, I will be discussing the most recent results, the risks and opportunities and update my stock price target for easyJet. easyJet Revenues Increase And Margins Expand   easyJet It is important to keep in mind that easyJet only provides detailed financial reports including cash flow statements and balance sheet data every six months. Besides the income statement and some information of key performance indicators for the airline, the third quarter results do not provide a lot of financial details. The group revenues increased by 11% driven by 7% growth in passenger revenues, 11% growth in ancillary revenues and a 42% increase in holiday revenues. The revenue growth was in line with the capacity growth pointing at revenues per seat being stable to modestly lower and 1% up when including ancillary revenues. At the same time, the airline cost per seat decreased by 1%. So, there has been some improvement in the cost efficiency and combined with the growth at the Holidays business this led to pre-tax profit increasing 16% to £236 million. What Are The Risks And Opportunities For easyJet? For easyJet, the risks are the same for any other airline. Fuel price and demand fluctuations are the primary risks and currently airplane shortages also add risks. easyJet flies to Tel Aviv, so in its route network there is some minor exposure to the tensions in the Middle East, but generally conflict is not good for sentiment for airline investment. On fuel costs, the company has a hedging strategy in place to catch off some risk on fuel price fluctuations. Opportunities for easyJet are the absorption of bigger A321neo airplanes which are not only more fuel efficient but also offer more seats and drive down cost items such as maintenance and crew costs per seat while offering higher potential. Holiday revenues are also a growth opportunity for the airline, but it should be noted that as Ryanair (RYAAY) has seen that Jet2.com (OTCPK:DRTGF) and easyJet are successful in the package holiday business they are also considering entering that market. If that happens, competition will intensify. Is easyJet Stock Still A Buy?   The Aerospace Forum To determine multi-year price targets The Aerospace Forum has developed a stock screener which uses a combination of analyst consensus on EBITDA, cash flows and the most recent balance sheet data. Each quarter, we revisit those assumptions, and the stock price targets accordingly. In a separate blog I have detailed our analysis methodology. For 2024, the EBITDA estimates have come down by around 2% but in the subsequent years towards 2026 the EBITDA estimates have gone up by around 2% for a total EBITDA generation now expected to be 1.4% higher compared to previous analyst estimates. While free cash flow generation is expected to be 60% higher. I believe the modest upward revision on EBITDA and significant upward revision on free cash flow is indicative of some lower CapEx due to continued delivery delays of new technology airplanes. As a result, for FY24 the price target has been lowered from $16 to $13.75 and from $15.94 to $15.09 for 2025 while the FY26 price target remained more or less unchanged at $14.85. So, my buy rating for the stock remains since there is significant upsides even with easyJet stock trading in line with its median EV/EBITDA rather than the higher EV/EBITDA peer group multiple. There are two OTC tickers for easyJet, namely EJTTF and the sponsored ADR ESYJY. The latter has a significantly higher volumes and so if you are interested in acquiring shares I would opt for the ADR. Conclusion: easyJet Stock Remains Significantly Undervalued For easyJet we have seen that the results are quite good with stable unit revenues, unit overall cost reductions and nice growth in the Holidays business. The combination of upgauging the fleet while also introducing more fuel efficiency and growing the package holiday business is something that I do like about easyJet and I believe that the stock remains significantly undervalued at current prices. That is why I maintain my buy rating but with a lower price target for FY24 while also noting the volatility of airline stocks for investors.  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. 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