The last few months have been a terrific time for easyJet (LSE:EZJ) shareholders. Since August, the short-haul airline stock’s enjoyed a 25% boost to its market capitalisation. And it’s not difficult to see why. This latest summer season delivered record results with a 16% jump in pre-tax profits during the three months leading to June.
In particular, easyJet Holidays has been stealing the show, with 33% passenger growth that paved the way to a 49% jump in pre-tax profits reaching £73m. This part of the business has now grown to be roughly 31% of easyJet’s bottom line – an encouraging sign given it comes paired with superior margins.
Pairing these tremendous figures with a seemingly rock-solid, cash-rich balance sheet suggests that the easyJet share price is set to continue flying.
Yet as other airlines release their results, a concerning trend’s emerging. Ticket pricing is weakening, likely due to reduced travel demand or increased competition as more airlines get back on track. Either way, it poses a significant headwind for easyJet’s current trajectory. So can the stock maintain its momentum? Here’s what the experts say.
easyJet share price forecast
The threat of falling airfares is undoubtedly frustrating. However, analyst forecasts for easyJet remain strong even as this external headwind’s started blowing. As previously mentioned, the group’s Holiday division’s rapidly expanding and offers an alternative lever for management to partially offset any price drops.
At the same time, analyst forecasts surrounding oil prices suggest a downward trend. The Economy Forecast Agency has predicted the price per barrel to drop to $62.92 by November next year. Compared to current prices, that’s roughly a 15.2% decline over the next 12 months. In other words, jet fuel looks like it’s going to get notably cheaper in 2025, helping offset the margin impact of lower ticket prices.
With that in mind, the optimistic outlook for the easyJet share price starts to make a bit more sense. Of the 20 institutional analysts following this business, three rate the stock as a Buy, 12 Outperform, and the remaining five on the fence with an Hold recommendation.
| Opinion | 12-Month Share Price Forecast | Potential Gain/Loss |
| Optimistic | 850p | +56% |
| Average | 670p | +23% |
| Pessimistic | 480p | -12% |
Is this a buying opportunity?
Considering the bullish opinions of analysts and encouraging-looking share price predictions, easyJet seems to be a screaming buy right now. However, that may not necessarily be the case. It’s critical to always take forecasts with a pinch of salt. They rely on a lot of assumptions resulting in questionable accuracy.
Should the geopolitical conflict in the Middle East escalate further, oil prices may end up climbing instead of falling. And with it, the cost of jet fuel could surge, sending easyJet’s profitability firmly in the wrong direction.
Apart from tighter margins, this scenario would also apply pressure to the newly reinstated dividends, which, even if they are maintained, could take a long time to recover to pre-pandemic levels.
Internally, easyJet looks like a great airline business. But there’s no denying the company’s facing off against a lot of external threats that management simply doesn’t have control over. And investors must consider whether this is a risk worth taking versus other opportunities.
This post was originally published on Motley Fool
