Investors are aware of the devastation the pandemic caused to the aviation industry. With flights grounded for nearly two years, airline earnings fell dramatically. As a result, International Airlines Group (LSE: IAG) shares fell over 73% in the three months between February 2020 and May 2020. 

However, thanks to excellent third-quarter results this year and improving airline traffic, I think IAG shares could be a bargain option for my portfolio. Investor interest has surged over the last month, causing it to jump over 26%. Here I will look at its pros and cons to see if it would be wise for me to invest in the firm before 2023.

Excellent results

Looking at the Q3 report, it is easy to see the reasons behind IAG shares’ positive momentum. The company saw year-on-year revenue growth skyrocket 367% to €1.2bn compared to Q3 2021 when the company lost €452m.  

In the first nine months of 2022, revenue from passenger ticket sales jumped nearly 350% to €14bn compared to the same period in 2021. This points to a healthier airline sector that is inching close to pre-pandemic traffic levels. 

In fact, the board said in the report that the recovery in Q3 puts the industry ahead of 2019 levels in terms of leisure travel. IAG is on target to hit 87% of 2019’s passenger capacity in Q4 and 78% across 2022. 

Can IAG shares handle big fluctuations?

While the recovery has been strong, there are also growing concerns the company will have to address in the coming months. Rising fuel prices and mounting debt are two areas most travel and transport companies are grappling with at the moment. 

IAG’s total net debt currently stands at €11.05bn, down 5% from the same period in 2021. While it is positive that the company is reducing this figure, it is still sizable. 

However, travel and tourism are expected to recover further as more Asian tourism markets open up. Most travel analysts expect flying hours in 2023 to be substantially better than in 2022. While this could further boost earnings and offset the debt, another big concern is the cost of fuel. 

Throughout 2022, oil prices have remained high. But this trend could be reversing already, according to a recent World Bank report. After surging 60% this year, analysts expect oil barrel prices to drop at least 11% in 2023. While this is significantly higher than 2019’s average of $60, large companies will figure out ways to offset costs. 

Also, this FTSE 100 firm currently has a sizable cash reserve valued at €9.3bn. I think this will help the firm navigate fuel price fluctuations better and also price out competitors in negotiations, provided travel continues to recover. 

This is why I think IAG shares have the potential to continue this run if external factors remain favourable. I am bullish on the firm but the uncertainty surrounding fuel prices makes me slightly vary. The aviation firm is now on top of my watchlist and I will look to make an investment if Q4 results maintain current growth trends.

The post Up 26% in a month! Here’s why I think IAG shares could still be a bargain appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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.

The last few years have been torrid for Jet2 (LSE: JET2). The low-cost leisure airline saw its operations come to a halt due to the pandemic. And since the reopening of borders, Jet2 shares have struggled to gain any momentum.

The stock has further lagged this year as ongoing inflationary pressures have coupled with turmoil at airports to push down its price. So, does this fall mean I should be buying Jet2 shares?

The results

Earlier this week saw the release of its results for the year ending 31 March. There were a few positives to take away, such as the 211% jump in revenue year-on-year. Total passenger numbers also increased to just short of 5m, compared to just 1.32m last year. Meanwhile operating losses were also cut by 4%.

However, investors were largely drawn to the comments made by Jet2 boss Philip Meeson. Within the release, Meeson hit out at “woefully ill-prepared and poorly resourced” airports and suppliers, as delays and cancellations continue to plague the firm’s operations.  

Covid restrictions seen earlier this year further impacted Jet2. As a result, the group reported losses of £388.8m for the period, up 5%. Thursday saw the share price fall over 10%.

Wider factors

My main concern with Jet2 is the troubles we’re seeing at hubs across the UK. The company scrapped further flight routes last month as issues such as staff shortages have placed immense pressure on the firm. Looking forward, Meeson stated how performance this year “very much depends on how quickly the broader aviation sector returns to some level of stability.” Jet2 is not alone in its struggles, as this week saw British Airways cancel a further 10,300 flights – 15% of its schedule – for this summer.

To add to this, inflation woes are also dampening the outlook for the travel sector. With rates reaching 9.1% for the UK in May, the months ahead may see consumers tighten their belts as they cut back on unnecessary spending. Earlier this year CEO Steve Heapy warned of increasing prices next summer. These two factors combined could see Jet2 suffer.

Rising fuel costs could also be an issue. the firm has done well to hedge the majority of its fuel for 2022. However, if prices continue to rise into next year, this could eat away at the firm’s bottom line.

Despite this, the business anticipates high demand in the future. And as a result, it has entered into an agreement with Airbus for up to 75 A321 neo aircraft, 60 of which are now confirmed orders. This shows Jet2 is clearly planning for the long run and has full confidence in its operations for the times ahead.

Would I buy?

It’s true that Jet2’s results showed some positive signs. But Meeson’s comments hint at the difficult period the business is set to face. I think the company will struggle to navigate the months ahead. And with inflation seemingly not slowing down, along with ongoing airport troubles, Jet2 shares will most likely take a hit. I won’t be buying any shares today.

The post Are Jet2 shares a buy? appeared first on The Twelfth Magpie.

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Charlie Keough 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.

However, the stock has shown signs of potential in recent times. And since early March the easyJet share price is up over 25%. So, will this upwards trajectory continue? Or should I be steering clear of it? Let’s explore.

Strong travel expectations

One positive for easyJet is that it should be able to capitalise on rising demand as more countries continue to remove travel restrictions. Examples of this include Italy, which recently dropped its ‘state of emergency,’ while from early May, Greece will join the growing list of restriction-free European countries. As a result, easyJet recently announced that demand for summer bookings over the past six weeks has exceeded that of the same period in 2019. Given the struggles it has experienced through the pandemic, this is great news for the firm.

On top of this, easyJet recently posted some solid results. The firm has managed to reduce its net debt from £900m to £600m, while March saw 80% passenger capacity compared to March 2019. It also stated that 64% of fuel for the second half of the year is hedged at $571 per metric tonne, partially offsetting the impact of current rising fuel prices. These results show the business is moving in the right direction post-Covid, as it edges closer to full capacity in the near future. As a potential investor, these are pleasing signs. 

easyJet concerns

However, rising fuel costs should still be of concern to easyJet. While hedging 64% of fuel may provide some short-term protection, the increase we’re witnessing will still have a big impact on the business. Should this eat into revenues, I’d expect to see a fall in the easyJet share price.

And it’s not just the cost of fuel that’s on the rise. With inflation soaring, people are seeing a sharp cost of living increase. While the business is experiencing high demand, a continuation of the rise could see future bookings impacted. This could have negative connotations for the firm and its stock.

The disruptions easyJet has recently been facing will also impact it. In some bases, up to 20% of staff have been off work due to rising Covid-19 infections. And earlier this month, it cancelled over 200 flights in one weekend. This is expected to continue to later into the year. When considering buying easyJet shares, this is a concerning factor.

So, where is the easyJet share price going next?

Where the easyJet share price goes next depends on a few factors. If it continues with its strong progress post-Covid, and if demand continues to rise, I think easyJet could have a strong finish to the year. However, despite the progress it has made, I see it struggling in the months ahead. Rising fuel costs, inflation, and Covid-19 cases could see the firm suffer. And as a result, I won’t be buying the shares just now.

The post Where’s the easyJet share price going next? appeared first on The Twelfth Magpie.

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Charlie Keough 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.

However, where will it go next? And does this fall mean I should be loading up on RR shares? Let’s find out.

The Rolls-Royce share price in 2022

Before we look at whether I’d buy Rolls-Royce shares today, let’s begin by looking at its performance year-to-date.

The stock entered the year trading for near 130p, a mere slither of the 300p price we saw pre-pandemic. And since then, Rolls-Royce has continued to fall.

However, late March saw the share price jump amid takeover rumours. As stories circulated via the Betaville website that the firm could soon be involved in a “significant corporate transaction,” investors rushed to purchase shares. The stock spiked 20% on the back of the news.

Wider outlook

Since then, the share price has fallen below the 100p barrier once again.

One reason for this is due to the hit Rolls-Royce took yesterday as JP Morgan downgraded the stock to ‘underweight’, as well as cutting its target price from 140p to 75p. Informing investors, it stated that the ‘New Markets’ division may offer “good long-term sales potential,” but that there is “no guarantee of good profits.” It further mentioned how it “might even be loss-making into the 2030s.” This is clearly not good news. And the 5% fall seen yesterday reflects this.

Yet, I think there is still hope for Rolls-Royce.

This is in part due to the full-year results released a few months ago. A standout figure was the firm’s statutory profit, which for the period was £124m. Given that in the year prior this was a £3.1bn loss, it’s clear to see the progress Rolls-Royce has made post-Covid.

Another factor is increased air travel. Rolls-Royce generates a large proportion of its revenues from servicing commercial jet engines. With passenger volume beginning to edge ever closer to the levels seen pre-pandemic, this should provide a boost for the firm.

However, rising Covid cases, alongside continuing travel problems, mean that passenger volumes may be adversely impacted. As cases continue to rise in places such as China, any future limitations on international travel will negatively impact Rolls-Royce shares.

Where next for Rolls-Royce?

So, where will the shares go next? Despite the issues, I do see promise. The firm has shown it has begun to take strides to get back to pre-pandemic levels. And despite the issues seen, over the long term, demand for travel will continue to rise. For example, easyJet has stated that summer bookings over the past six weeks are above pre-pandemic levels.

However, I think the firm may struggle in the short term as it continues to recover from its Covid hangover. Rising cases, along with the problems we are currently seeing in the travel industry, will most certainly dent investor confidence surrounding Rolls-Royce. Therefore, while I see potential in Rolls-Royce, I’ll only be placing the stock on my watchlist and monitoring its movements over the coming months.

The post Rolls-Royce shares are down 30%! Where are they going next? appeared first on The Twelfth Magpie.

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Charlie Keough has no position in any of the shares mentioned. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. 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.

Believing that a company’s value might explode this year sounds a bit ambitious given the funk markets are currently in. But as 2021 showed, it’s also achievable if I pick the right FTSE stocks and encounter a healthy dollop of luck.

Today, I’m focusing on one share that I think has the potential to perform better than most in 2022. It might not, of course, but I do think it’s possible.

A FTSE stock that’s ready to fly

Online travel operator On the Beach (LSE: OTB) probably wasn’t the stock some would expect me to talk about in these terms and I understand why. The Manchester-based business has endured a tough couple of years thanks to the pandemic. I won’t include any figures on trading here. Let’s just say they haven’t been great. 

Having said this, there are a few reasons why I think the shares could finally be ready to fly.

First, we appear to be entering the final stages of Covid-19. As confidence returns (and restrictions become a distant memory both at home and abroad), more of us will feel confident enough to start booking holidays. Goodness knows, the demand is there. Yes, that will take some time to filter through to OTB’s numbers, but analysts are already expecting earnings per share growth of 126% in FY23 (beginning this October). Growth that strong could light a fire under the share price.

Second, On the Beach’s asset-light business plan means it can be far more nimble than larger industry rivals. If it needs to prioritise marketing particular destinations to gain the full benefit of the post-pandemic recovery, it can do so quickly. To me, that gives it an advantage over its travel stock peers.

Third, On the Beach’s finances are arguably in a better state than other companies in the sector. In its annual report, it said it “enters the new financial year well-funded to successfully and sustainably grow market share“.

Clearly, the probability of On the Beach soaring in price depends greatly on it releasing better-than-expected updates. However, a sizeable gain is not unrealistic for a business of its size. As I write, OTB shares are worth less than half the value they hit in April 2018. The market cap at Friday’s close was £475m. While the past is no reliable guide to the future, it shows that in a travel-friendly world, the share price can be much higher.

Nothing’s guaranteed

But I’ve already mentioned that luck plays a role. Any stock that’s attractive on paper can perform disastrously events conspire against it. Another Covid-19 variant, industrial action, terrorism in a popular destination — all of these can dent holiday bookings. And that would keep OTB’s share price grounded.

Plus there’s the possibility the general market malaise we’ve seen in January may continue for longer than anyone expects. This will prove a drag on most share prices. This is why spreading my cash between quality growth stocks and funds is an essential part of my investing strategy.

Optimistic holder

Yet I do think there’s a real chance of On the Beach finally rewarding this patient, battle-scarred investor in 2022. Exploding in value in under a year is a challenge, but I think the odds might be turning in this FTSE stock’s favour.

It remains my favourite Covid-19 recovery play. 

The post I think this FTSE stock could explode in 2022 appeared first on The Twelfth Magpie.

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Paul Summers owns shares in On the Beach. The Motley Fool UK has recommended On The Beach. 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.

The International Consolidated Airlines (LSE: IAG) share price tumbled on Friday as investors recoiled from the news that a far-more-powerful variant of the coronavirus had been found in Southern Africa. 

As I type, the UK has suspended flights from six countries on the continent. By the time you read this, it could be more. If existing IAG holders are looking for crumbs of comfort, one might say that pretty much everything else — including other airline stocks, tour operators and hoteliers — fell in tandem.

So, where next for the British Airways owner? Well, no one can know exactly what will happen next. Even so, we can come up with a number of scenarios as to what could. For ease, I’ve gone to both extremes. 

The worst-case scenario

By far the worst possible turn of events for markets — and the IAG share price — is for evidence to emerge that the variant is running riot. As successful as the UK’s vaccination programme has been, the NHS was already trying to contain another outbreak of infections before Friday’s news hit. Any suggestion that the existing vaccines aren’t powerful enough will compound the issue. Perhaps worst of all, we won’t know for a few weeks. And the market isn’t partial to uncertainty.

Naturally, all this won’t do IAG any favours. As concerns mount, we can expect more travel restrictions to be imposed. That will put the already indebted FTSE 100 member under yet more financial pressure when it can least afford it. Add other concerns such as the prospect of interest rate rises and soaring prices to the mix and things could get very nasty.

On the other hand…

Now let’s ponder the best outcome.

News in December that the spread of this new variant has been contained would clearly be a good thing, as would indications that it’s not as strong as first thought (and/or existing vaccines can be quickly modified). I wouldn’t expect the new travel restrictions to be dropped. However, it may mean that recently reinstated (and lucrative) routes can stay open.  

Should all this come to pass, I’d speculate the IAG share price will bounce hard in December before levelling off as skilled (lucky?) traders take profits. What I believe is less likely to happen, however, is for any rise to be sustained. For me, there are simply too many unknowns ahead. Just knowing that another variant has been found highlights that IAG’s road to recovery will be long and hard. 

IAG share price: risk vs reward

Throughout the coronavirus crisis, I’ve steered clear of investing in airlines. Depending on the time period one selects, this has either been a huge mistake or a wise move. Between October 2020 and March 2021, for example, the IAG share price more than doubled. In the last six months, the same stock has lost a third of its value. Investing is hard.

As a committed Fool, I’m looking to make money from shares over the long term. From this perspective, there could be a place for IAG in my portfolio, especially if I were sufficiently diversified elsewhere. With a huge amount of quality stocks to choose from, however, I’m still hesitant, especially as others offer a solid dividend stream to boot. 

Will the IAG share price recover in December? I’m not counting on it.

The post Will the IAG share price recover in December? appeared first on The Twelfth Magpie.

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Paul Summers 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.

Rolls-Royce shares: unfairly valued?

It’s not hard to see the appeal. Rolls-Royce shares still languish far below where they were a few years ago. With Covid-19 infection rates falling in the UK and demand for international travel roaring back, I think there’s a lot to be optimistic about. Put simply, more planes in the sky mean greater demand for the company’s engines (and the need for those engines to be maintained) going forward.

Yesterday’s news that the Rolls would be looking to turn cash-flow positive in the second half of this year was also encouraging. That said, it’s clear a full business rebound is still some way off. As indicated yesterday, the slow recovery in travel means its target of £750m in cash flow might not be reached in 2022 as hoped. A lot can happen before then. This is where things get problematic.

Based on past performance, Rolls still qualifies as a high-beta stock. In other words, its share price is more sensitive to setbacks than the market as a whole. That’s concerning if I think a correction is imminent.

As an aside, ‘anchoring’ myself to historical prices that Rolls-Royce shares have hit should also be avoided. In reality, stocks don’t know how valuable they once, were or whether they’re regarded as ‘bargains’ or not. Shares also don’t care who owns them. 

Speaking of bargain hunting, I wonder if I might be able to make a better return from Pershing Square (LSE: PSH)?

Better buy?

I reckon this top-tier fund has stayed off many radars due to its manager — US billionaire Bill Ackman — not being particularly well known in the UK. Lacking exposure to tech stocks, PSH definitely doesn’t generate as many headlines as fellow FTSE 100 member Scottish Mortgage Investment Trust either.

Ackman is a value-focused investor and Pershing Square has just 10 ‘bargain’ holdings. Some names will probably ring a bell. Hilton and Chipotle, for example. Others like Lowe’s (the home improvement retailer) and Agilent Technologies (analytical instrument developer) may be less familiar. Universal Music Group will also enter the portfolio soon.

What I find really interesting about Pershing Square is that it trades on a big discount to its underlying holdings (net asset value). That’s despite PSH outperforming the S&P 500 index over the last five years — no mean feat considering the latter’s huge dependence on only a few tech titans. 

Then again, like Rolls-Royce shares, the portfolio has definitely benefited from the huge bounce seen in stocks as a whole over the last year or so. So, if I were to invest in PSN now, I’d still expect some volatility. I’d also need to be comfortable with Ackman’s occasional desire to short stocks (which hasn’t always paid off).

Risk vs reward

All things considered, I’d be more inclined to buy a stake in Pershing Square over Rolls-Royce shares today. I don’t expect an easy ride for either. Nevertheless, the former focuses on companies that offer Buffett-style ‘economic moats’, high returns on capital and robust balance sheets. This leads me to think PSH offers a better risk/reward trade-off compared to RR.

The post Are Rolls-Royce shares now a bargain? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Scottish Mortgage Investment Trust. 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.

Having been a holder of the stock at the beginning of the pandemic (and suffered), is it now time for me to take a fresh look at FTSE 100 company?

Carnival shares: what’s the draw?

While I did decide to jettison my holding last year, I do still think there’s a lot to like about Carnival. 

For one, it’s the clear market leader at what it does (at least, when its liners are actually permitted to move). The owner and operator of more than 100 ships, Carnival’s portfolio includes brands such as Princess Cruises, Cunard, and P&O.

In the good ol’ pre-pandemic days, it was a hugely profitable business, helped by the fact that guests couldn’t escape when at sea. Over lengthy trips, that can really boost margins.

The long-term (and I really mean long-term) outlook for the industry also looks to be positive. As things stand, US travellers are by far the most frequent cruisers. That could change over the next few decades as demand from other parts of the world grows. Asian markets could prove particularly lucrative for companies like Carnival due to growing levels of affluence among the middle class. As well as serving far-more-active retirees, there’s also a possibility that taking a cruise may become increasingly popular with younger customers.

Once bitten…

Despite all this, I still think there are many issues with the investment case for Carnival.

The balance sheet is under massive pressure. In fact, the amount of net debt is now higher than the company’s entire market capitalisation! This is no real surprise, of course. Huge cruise-liners cost bucketloads of cash to maintain whether they’re permitted to move or not. I was prepared to overlook this when I picked up the stock a few years ago. That worked out well… 

Having made it this far, I’m confident management be able to steady the ship through financial jugglery until trading bounces back. Unfortunately, any hope of dividends looks dead in the water. As someone who originally bought Carnival shares primarily for income, that’s a problem for me.

And this is the rosy scenario. Yes, infection rates are going in the right direction, at least as far as the UK is concerned. However, vaccination programmes are clearly progressing at different rates around the globe. This could halt some Carnival cruises for a while as well as causing potential customers to think twice before booking. Pent-up demand is one thing but I can’t be the only one that remembers the ‘floating petri-dish’ headlines of 2020. 

A safer option?

Buying Carnival shares now may prove to be a bargain in a few years. However, my sea legs aren’t yet strong enough to deal with the potential for ongoing volatility. Yes, the shares are up a very healthy 65% in the last year. However, performance over the last month hasn’t been quite so stellar.

This makes me wonder if quite a bit of the recovery has now been priced in and whether the shares could drift for a while. 

All told, I feel far safer playing the rebound in travel via this UK growth stock.  

The post Carnival shares: can this news tempt me back on board this FTSE 100 stock? appeared first on The Twelfth Magpie.

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Paul Summers 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.

Massive loss 

Let’s get those grim numbers out of the way. Due to ongoing restrictions, passenger capacity over the first six months of 2021 was just under 22% of that seen over the same period in 2019. Accordingly, revenue from travellers tumbled 72.3% to just €1.14bn. This left total revenue at €2.21bn (down 58.2%). 

Naturally, IAG’s bottom line suffered in tandem. A massive post-tax loss of €2.05bn was logged. 

Where next for the IAG share price?

As with most stocks, I believe there are both bull and bear points to the IAG investment case. One reason to be optimistic is that the aforementioned pre-tax loss was actually far less than reported over the same period in 2020 (€3.81bn). So, things really are improving, albeit very slowly.

Second, news that fully-vaccinated flyers from the US and EU ‘amber countries’ will not be required to quarantine when arriving in the UK is clearly a shot in the arm for the company and its peers. I certainly don’t think anyone can reasonably deny that there’s an awful lot of pent-up demand from people to travel abroad. It really is just a question of time.

From a financial perspective, the FTSE 100 airline also looks to have taken all the steps it can. Today, IAG said it had €10.2bn in liquidity at the end of June thanks, in part, to recent oversubscribed bond issues, cost-cutting and a deferral of pension contributions.

Reasons to be cautious

On the flip side, the ongoing uncertainty with regard to just how the next few months will play out means that IAG still isn’t able to provide the market with guidance on full-year profits. The only prediction the company was willing to make is that capacity in Q3 is expected to be around 45% of 2019 levels.

That’s clearly better than that seen over H1. However, it also underlines just how far off a full recovery really is. Nor can it be guaranteed, which means the IAG share price will likely remain volatile for a while. 

IAG’s creaking balance sheet is another worry for me. Net debt hit £12.1bn at the end of June — up 24% on this time last year. Sure, all airlines are suffering. Even so, the financial position looks worse compared to other London-listed airlines such as Wizz Air. I certainly wouldn’t be expecting dividends for a while if I held the shares. Moreover, the post-Covid-19 trading environment will surely be just as competitive as it was before the pandemic struck. 

Still risky

Anyone buying the stock this time last year would be registering a gain of around 47% before markets opened. This is a great result and highlights how having a contrarian mindset can really pay off. Nonetheless, I wonder if the IAG share price is now firmly up to date with events. 

As opportunities go, IAG still doesn’t make the cut for me and I won’t be buying now. In my view, there are other FTSE 100 companies offering arguably as much upside for much lower risk.

The post The IAG share price falls: opportunity or warning? appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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.

easyJet share price: ready to fly?

There are certainly arguments for thinking the recent positive momentum in the easyJet share price will continue. After being confined to their homes for so long, I don’t think anyone can deny that demand for foreign travel and holidays from families and budget travellers is there. 

There’s also a sense that UK investors think the worst is over. Interestingly, easyJet shares were the fourth most popular buy on share-dealing platform Hargreaves Lansdown last week. The fact that industry peer International Consolidated Airlines and jet engine-maker Rolls Royce also featured is another bullish indicator (although both featured on the list of most popular sells too).  

Even so, I don’t think it’s a screaming buy. Naturally, the FTSE 250 stock’s balance sheet isn’t quite what it used to be with the company now carrying a significant amount of debt. In addition to this, easyJet will still face significant competition for passengers in what remains a cutthroat industry.

There are other, more general risks to consider. A big rise in the number of infections from the Delta variant could slow short-term demand for travel even when restrictions are lifted. Indeed, the World Health Organisation has already warned other countries not to lift Covid-19 restrictions too quickly. A higher oil price isn’t great news for airlines either.

An even stronger company?

My caution over easyJet could also be applied to package holiday firm and airline Jet2 (LSE: JET2).

Like easyJet, restrictions on travel meant Jet2’s planes were out of the sky for over half the year. Even when permitted, a “significantly reduced” number of flights took to the skies. Passenger numbers fell by 91% to 1.32 million, forcing the company to report a pre-tax and foreign exchange revaluation loss of just under £374m today.

Thankfully, this looks like being a temporary blip. Bookings for next summer have been “encouraging” and a “materially higher” proportion of these are for (higher-margin) package holidays, the company said. 

Jet2 believes it will “emerge from this crisis an even stronger company”. Is it a better buy though? I’m on the fence. Its finances look decent. Having slashed costs and propped up its balance sheet via loans, the firm has just over £1.9bn in cash. On the flip side, easyJet’s status as one of the largest airlines in the (pre-pandemic) world arguably gives it more clout. Its brand is likely to be far more familiar to travellers as well.

Cautious buy

I think there’s a good chance the easyJet share price will be higher in 2022. The same goes for Jet2. As such, I think both could be cautious buys for my portfolio. That said, I would always check that I’m sufficiently diversified elsewhere first. I’d also need to be willing to hold if things don’t go to plan. As Jet2 commented today, it still has limited visibility on performance in the current financial year.

Notwithstanding this, I think I’ve found an even better opportunity for myself elsewhere in the travel space. 

The post Is the easyJet share price about to soar? appeared first on The Twelfth Magpie.

More reading

• Could now be the time to buy great UK shares at bargain prices?
• easyJet shares are up 40% in a month. Here’s why
• Up close to 50% in a month, what’s next for the easyJet share price?
• The easyJet share price is up 49% in a month. What on earth’s going on?
• At £5, could the easyJet share price still be a long-term bargain?

Paul Summers 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.