Time to buy, as upbeat quarterly results make the easyJet share price rock up and down?

On Thursday (29 January), easyJet (LSE: EZJ) reported a 52% fall in winter revenues — and the share price spiked up 6% in early trading, but quickly lost its gains. Strategic route investments and seat capacity growth were drivers of the loss, and the future is reportedly rosier.

The update for the quarter ended 31 December revealed a headline loss before tax of £93m. That’s worse than the same quarter a year ago, which produced a negative figure of £61m. But the budget airline remains optimistic about the year to come.

CEO Kenton Jarvis is bullish, speaking of “continued demand for our flights and holidays over the last quarter, growing airline passenger numbers and load factor with easyJet holidays maintaining its strong growth trajectory attracting 20% more customers year on year.”

He added: “Bookings are building well for the summer season, with our largest ever January booking period,” and reckons the company is on track for its medium-term target of £1bn annual profit before tax.

The January booking season has hit record volumes and revenue levels. And the summer is already 22% booked for the airline, and 47% sold for holidays. Corporate research firm Sustainalytics, we’re told, gave easyJet its best airline risk rating out of 69 assessed.

Too cheap to miss?

The above chart shows how the easyJet share price has been a disappointment. It’s down 33% in the past five years, and has been showing little sign of recovery from that. And with dividend yields of only around 2.7%, it’s not exactly a passive income cash cow. So why might investors consider buying it? It all comes down to valuation.

We’re looking at a trailing price-to-earnings (P/E) ratio of just 7.4 here — only about half the long-term FTSE 100 average. That lines up with out-of-favour International Consolidated Airlines, also on a P/E of 7.4. But it’s below some smaller airline ratings, with Wizz Air on nine and Ryanair up at 13.

I can’t help seeing easyJet as possibly the best in its sector for investors to consider. That’s especially with available seat kilometres (ASK) expected to grow around 7% year on year in 2026. And easyJet holidays aims to grow its customer count by at least 15% this year, from a base of 3.1m.

What to watch out for

While easyJet would be my pick of the sector, I’m still not convinced I want to invest in an airline at all. We really have to remember we’re in a time of relatively cheap oil. And airlines can be held hostage to fuel prices — and a wide range of other costs completely outside their control. Oil at around $65 per barrel has picked up a bit in the past month. But it’s still close to its lowest levels of the past five years.

Still, even if I won’t go for the sector myself, those who do like it might have hit on a good time to consider easyJet as the outlook brightens.

The post Time to buy, as upbeat quarterly results make the easyJet share price rock up and down? appeared first on The Motley Fool UK.

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Alan Oscroft 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.

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