Up 47% in less than a month, the easyJet (LSE: EZJ) share price has performed spectacularly over the short term. That comes despite the challenges of higher jet fuel prices and weakened passenger confidence brought about by the Middle Eastern conflict.
As a long-term investor though, I look at a longer timeframe.
The easyJet share price remains a bit short where it began the year – and 39% below where it stood five years ago.
That, in turn, was already well below its pre-pandemic highs. In fact, going back to 2015, the easyJet share price sometimes stood above £15. That is slightly more than triple its price today.
So even after the jump over the past month, could this still potentially be a long-term bargain?
A proven business with a promising future
I think the answer is potentially ‘yes’. In fact, a few weeks ago I was looking at its shares and weighing up whether I ought to buy some as they seemed cheap. What put me off at that point was the risks involved with the uncertainty of the Middle Eastern conflict.
Clearly, I was not alone in running my slide rule over easyJet. A key reason for the share price jump over the past few weeks was news that investment firm Castlelake was in the early stages of considering a possible offer.
Castlelake had not approached the airline (and still has not, as far as we know). City rules mean that if any offer was to be made, it would need to be pitched at no less than £4.03 per share. That is well below the current open market share price.
This bid may be opportunistic but, then again, many are.
easyJet’s business model has been proven over time and I believe that it has strong future potential. But in the short term it is beset by challenges such as jet fuel price volatility. It reported a headline loss before tax of over half a billion pounds for the first half.
What’s a fair price for easyJet?
The current share price suggests that the market reckons easyJet is worth at least £5 per share. Could it be worth more?
Just because a share was once worth far more than its current price does not it may be worth that again. After all, things change.
Similarly, while Castlelake may see potential value in easyJet as the firm weighs up the possibility of a bid does not necessarily mean the same is true for private investors. Small private investors sometimes have different priorities to large institutional ones or trade buyers.
However, I do reckon easyJet could ultimately be worth well north of its current price. It has a large customer base, strong brand and efficient operating model. It has ample room for future growth, for example in its holidays division. That division’s revenues showed 30% year-on-year growth in the first half.
That said, the easyJet share price has soared since I considered it a few weeks ago. The risks I saw then about high jet fuel prices and potentially softening passenger demand remain valid, in my view, as long as the Middle Eastern conflict lacks full and final resolution.
I may be missing a potential long-term bargain but, right now, I am still unwilling to invest.
Should you invest £5,000 in easyJet Plc right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if easyJet Plc made the list?
Christopher Ruane has no positions in any of the shares mentioned.
