FTSE 100

Where next for the easyJet share price?

Could easyJet (LON: EZJ) deliver a share price recovery?

The easyJet share price (LON: EZJ)  has experienced a ‘year of two halves’ in 2021. It initially rose from 635p at the start of the year to a high of over 920p by May. However, since then it has delivered a significant fall so that it now trades at around 550p. That’s a fall of 14% since the start of the year.

Of course, the company’s financial and share price prospects are closely linked to the path taken by Covid-19. This may explain its performance in 2021. Investor sentiment towards the travel sector improved around spring, when Covid-19 containment measures were gradually eased. However, the continued prevalence of the virus and the travel restrictions it continues to cause appear to have dampened investor enthusiasm towards the easyJet share price.

This situation may persist in the short run. The pandemic remains a situation that is impossible to accurately predict. It could gradually fade as new variants become milder. This would likely be a positive for easyJet, since it could lead to the relaxation of travel restrictions. Equally, though, a rise in hospitalisations and severe illness may mean that travel restrictions remain in place. This may prompt further challenges for the firm’s share price.

easyJet’s latest full-year results highlighted the difficulties it is currently facing. It made a headline loss before tax of £1,136m. Further losses would be unsurprising, since its financial performance is likely to be disrupted in the current financial year.

However, the company has been able to cut costs and raise capital to strengthen its financial position. Indeed, at the end of its most recent financial year the firm reported total liquidity of £4.4bn. This suggests it has the financial means to overcome short-term challenges caused by the pandemic. More importantly, it may be in a strong position to benefit from a likely long-term recovery in demand for air travel and holidays.

Clearly, there are no guarantees that trading conditions will improve over the coming months or even years. As a result, easyJet is a relatively high-risk stock that could experience significant share price volatility.

At the same time, though, its recent share price fall may factor in current challenges facing the wider travel sector. This could provide an opportunity for share price recovery over the long run, albeit with significant uncertainty likely in the meantime.

Not Investment Advice Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.