I think easyJet and these other UK shares could be in for a nightmare November

November could be another volatile month for easyJet plc (LON:EZJ) shares, thinks Paul Summers. These other stocks could also face a rough ride.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Times have been tough for holders of easyJet (LSE: EZJ) shares. They could be about to get even tougher.

Next month, the company will provide investors with final results for its 2019/20 financial year. Now, no one expects the numbers to be good. Indeed, easyJet has already warned that its first-ever annual loss could hit £845m! Nevertheless, the possibility of another lockdown and further travel restrictions could result in more investors deciding to jettison the stock in November.  

The company is doing what it can to mitigate things. Most recently, easyJet reported that it had raised almost £306m through the sale and leaseback of nine Airbus 320 aircraft. This will help shore up the balance sheet but it’s unlikely to be enough. Indeed, the mid-cap has called on the UK government to provide more support to the sector in October.  

Clearly, easyJet shares could do very well in the event of a sudden vaccine breakthrough or reduction in infections. Right now, this looks like wishful thinking. With industry peer IAG warning that passenger numbers won’t recover to pre-coronavirus levels until 2023, the runway to recovery looks long and hard. 

This is not to say that the Luton-based airline is the only company whose owners face a nightmare November. 

Time at the bar?

Holders of JD Wetherspoon (LSE: JDW) may want to look away from the pub chain’s share price when it provides a trading update on the morning of 11 November.

I can’t see the numbers and outlook as being anything but bleak. After all, JD Wetherspoon already announced its first annual pre-tax loss since 1984 earlier this month. The recent introduction of curfews across many parts of the UK is unlikely to have improved the situation. News of the company needing to slash jobs, while not unexpected, doesn’t bode well either. 

Like easyJet shares, the question to ask is how much of this is priced in. At half the price they were at the beginning of 2020, you might think ‘quite a lot’. Moreover, analysts are expecting earnings to rebound massively in FY22, leaving the shares on a P/E of 13 (if you still pay any attention to forecasts). 

Nevertheless, I’d be inclined to look elsewhere, at least until the crucial coronavirus ‘R rate’ is on the retreat. On a risk-reward basis, JDW still doesn’t tempt me. 

Double-whammy

A final share that could face selling pressure next month is high street retailer and travel concession operator WH Smith (LSE: SMWH). The company is due to announce its latest set of full-year numbers on 12 November. 

Before the coronavirus reared its ugly head, it was a quality business generating excellent returns on capital employed. Since then, we’ve had the double-whammy of deserted high streets and a myriad of travel restrictions. The latter is particularly problematic since this was the main growth driver for the FTSE 250 member. 

With Boris Johnson’s fingers hovering over the ‘lockdown’ button, it does feel like things could get worse before they get better. More restrictions would likely have a severe impact on pre-Christmas high-street sales for the company. I wouldn’t like to bet on it being able to compete with the likes of Amazon for online book sales either.

For now, WH Smith is treading water. Next month could see it sink. Now is not the time to be getting involved, I feel. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Down 70% with a P/E of 3.5! Is this FTSE 250 stock on the verge of a MASSIVE comeback?

Motor finance lenders are getting a second chance in court that could avoid £30bn in penalties. Is this FTSE 250…

Read more »

Investing Articles

This FTSE 100 stock’s down 50% with a forward P/E of just 6.6! Is it a screaming buy for me?

This FTSE 100 homebuilder surged 40% during most of 2024 before crashing, creating what looks like a lucrative buying opportunity.…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Is Nvidia heading for the mother of all stock crashes in 2025?

After a seemingly unstoppable rise, is AI chipmaker Nvidia's stock going to suffer badly if the current AI boom cools…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Fancy a 13.9% dividend yield? Consider these dirt-cheap investment trusts!

These investment trusts are trading at whopping discounts to their net asset values (NAVs). Here's why they could prove to…

Read more »

Investing Articles

If the market shut down for 10 years, I’d be happy to hold these 2 FTSE 100 shares

Our writer reveals a pair of FTSE 100 shares that he reckons are well set up to deliver strong returns…

Read more »

Investing Articles

Surely, the Rolls-Royce share price can’t go any higher in 2025?

The Rolls-Royce share price was the best performer on the FTSE 100 in 2023 and so far in 2024. Dr…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Here’s how an investor could start buying shares with £100 in January

Our writer explains some of the things he thinks investors on a limited budget should consider before they start buying…

Read more »

Investing Articles

Forget FTSE 100 airlines! I think shares in this company offer better value to consider

Stephen Wright thinks value investors looking for shares to buy should include aircraft leasing company Aercap. But is now the…

Read more »