EasyJet is due to provide the market with an update tomorrow. If you’re an airline, you will be feeling particularly frustrated at the moment. Having clawed you way through Covid, you have been hit with the disruption to routes caused by the Russian invasion of Ukraine, and now it seems that there is going to be further chaos at key UK airports as we proceed into the Easter break.
Looking at the 12 month picture for easyJet, volumes were down right up until really the first week of September last year, when investors started to trade the stock more actively. But there are still many, many reasons not to touch this one.
The share price has failed to get above 700p since October and at time of writing was trading at 527p. Stockopedia rates easyJet a sucker stock, with a stock rank of 2/100. That’s pretty desperate, and beyond that it is still trading at a PE of 24x (12m forecast rolling). So what do the institutional investors think?
What can machine learning teach us about easyJet investors?
Data compiled by artificial intelligence specialists Irithmics can help as to evaluate where bigger investors like fund managers and pension funds stand on easyJet. Investors are really split into two camps when it comes to the airline.
Longer term, strategic investors have a negative bias. It’s not tragic, but what it does mean is that they are unlikely to be increasing their allocations at the moment. They are not as negative as they are on, say, Barclays plc, where we can see some extreme negativity at work. I don’t have data for another airline to compare easyJet against this week, but suffice to say there is a lot of negativity out there in the market right now.Shorter term investors like traders are in fact positive on easyJet. Those investors that behave with a more short term, tactical horizon, are more positive. Their appetite remains limited, however. There is an expectation of negative news from the company tomorrow. From their perspective, easyJet would need to come up with something really quite special tomorrow.
easyJet faces major headwinds from travel disruption
Investors are going to be razor focused on the ongoing disruption in the UK airline sector as we move into what is anticipated to be a very busy weekend on key routes. Staff shortages and Covid illness are hammering big names like British Airways as well as easyJet. The UK’s Civil Aviation Authority has asked airlines to only advertise flights they are confident they can run. Richard Moriarty even told airlines that short notice cancellations “are not just distressing for affected consumers but have the potential to impact confidence levels across the industry.”
It seems that higher case loads of Covid are making the problem even worse in the UK, although other European destinations are also struggling. Manchester airport remains heavily affected by delays and said that it could potentially take months for it to bring staffing levels back to those needed for normal service to resume.
It looks to us like easyJet will continue to struggle this year. With bigger hitters staying away, retail investors are unlikely to lift the share price by much.
