Since 2025 kicked off, the easyJet (LSE:EZJ) share price hasn’t delivered the best of performances. However, looking at the latest analyst forecasts, it seems institutional sentiment’s becoming increasingly bullish, with one analyst predicting the stock could climb to as high as 900p over the next 12 months!
So what’s behind this 80% potential jump? And should investors be considering the short-haul airliner for their portfolios?
Firm-wide double-digit growth
Despite having a rocky few years, easyJet’s business appears to be back on track. Its latest quarterly results for the three months ending in December showed a massive improvement in pre-tax losses, which landed at £61m compared to £126m over the same period a year ago. At the same time, top-line performance surged, with double-digit growth reported across all segments.
Leading the charge is the group’s Holiday division, with sales rising by 36% to £247m and a 39% boost to pre-tax profits landing at £43m. And management anticipates this momentum will continue into 2025 with an expected 25% boost to customer growth.
Overall, easyJet anticipates hitting £709m in pre-tax profits by the end of its 2025 fiscal year – a 16% increase compared to performance in 2024. But is that enough to warrant a near doubling of the share price, as suggested by some forecasts?
While a lot has to go right for the easyJet share price to deliver such impressive gains, it’s not a completely wild expectation. After all, the shares are currently trading at a dirt cheap forward price-to-earnings ratio of just 7. That’s around half of the group’s five-year average, suggesting the stock’s presently underappreciated by investors.
What could go wrong?
Not every analyst following this business is as optimistic. And of the 19 following easyJet, the average consensus forecast is for the share price to reach 700p by this time next year. That’s still a pretty solid 42% potential rise. But, like all predictions, nothing’s set in stone.
As a business, easyJet’s bottom line is highly sensitive to the price of oil since it’s a primary ingredient of jet fuel. In recent weeks, oil prices have been falling. But should that trend reverse, profit margins are likely to start getting squeezed.
Similarly, if economic conditions worsen across the UK and Europe, passenger volumes may stumble as fewer families venture on holidays. And combined, these headwinds could cause easyJet to fall short of its £709m pre-tax profit target.
Time to buy?
The depressed valuation, paired with improved financials, certainly makes easyJet an attractive investment proposition. And it’s a business I’ve slowly been warming up to. However, personally, I believe there are other opportunities to be back elsewhere that offer similar growth potential at lower risk levels.
So easyJet isn’t a business I’m rushing to buy right now. But for investors seeking exposure to the travel industry, this business might be worth a closer look.
This post was originally published on Motley Fool
