The easyJet (LSE: EZJ) share price has been on some journey in the past few years. The pandemic brought its operations to a standstill. And since then, it’s battled to recover. While the stock has shown glimpses of hope, it’s still far off its pre-pandemic levels.
Despite a near-10% rise in the last 12 months, it’s fallen 30% in the last six months alone.
With that drop, I’m considering jumping in and snapping up some cheap stock.
Strong momentum
Despite a poor performance, I think there’s plenty to like about easyJet. And the business has strong momentum.
Most recently, it released a positive trading update, which highlighted the strides that the firm has taken since 2020. For the year, easyJet forecasts a pre-tax profit of between £440m and £460m. And with it having achieved the majority of its current medium-term targets, it’s set fresh goals, including the ambitious aim of achieving a profit before tax of £1bn.
It’s also thinking long term, as seen by its agreement with Airbus. As part of its newest proposal, the company has agreed to buy more than 150 new short-haul aircraft for delivery from 2029. It also has additional purchase rights for a further 100, should it want to exercise this.
Growing holidays business
Part of its recent success has been fuelled by its holidays business. This allows customers to book package holidays with perks such as free child places and low deposits. As high inflation continues to linger, I think this will be popular, evident from the £120m profit it’s expected to deliver for the year.
The risks
Despite that, it’s no secret that the company is prone to inflationary pressures. With recent rates hitting levels not seen in decades, consumers have been tightening their belts. While easyJet provides cheaper alternatives, holidaymakers may still decide to skip a holiday in favour of cutting down on costs.
It’s also susceptible to the rising price of jet fuel. The war in Ukraine saw prices skyrocket at the beginning of last year. And the current events in the Middle East have had a similar impact. Maybe this has investors spooked.
However, the airline has protected itself against this, to a degree, by hedging nearly 75% of its fuel requirements for the first half of FY24 at $866. Additionally, it’s hedged 46% for the second half at $822.
Should I be rushing to buy?
So, is this a rare opportunity to add easyJet shares to my portfolio for a cut-down price?
I think so. Inflation is a concern. But as a budget airline, easyJet is in a strong position to ride the storm. Its growing holidays business is proof of this.
Given strong momentum and talks of reinstating its dividend, I’m a fan of easyJet shares.
In the weeks ahead, if its share price continues to slide, I’ll strongly consider opening a position.
