Apollo’s new bid values the airline at about 715p per share, well above Castlelake’s 690p. Naturally, that “delivers a superior outcome” for shareholders, as the board stated.

The sudden jump clearly means easyJet is more valuable than the market thought. So what does this mean for investors watching from the sidelines?

Deal mechanics, customers, and confidence signals

The deal isn’t done yet. It still needs shareholder approval and regulatory clearances, and there’s a strict timetable: Apollo has until 7 August 2026 to announce a firm offer or walk away. Analysts warn there could be more twists, even a bidding war, before any closing.

For customers, the big question is ownership change. Some worry private-equity owners cut costs hard or sell assets. Others point out easyJet’s core model – low fares, point-to-point routes, ancillary revenue – should stay intact in the near term.

There’s also a confidence signal: insiders have been buying shares recently, and the board is “minded to recommend” Apollo’s terms.

But with a possible delisting if the deal completes, is now the time to buy, or wait?

Should investors consider easyJet now?

If the shares keep trading, the risk/reward hinges on the offer outcome. If Apollo (or Castlelake) closes, shares could be delisted. Moreover, if the deal fails, they might fall back toward pre-bid levels. Those are the core risks to think about.

If the shares continue trading, the outcome looks promising. Fundamentally, the airline has been leaning on its holidays business and ancillaries to lift margins, while competing hard with Ryanair and Jet2 on cost and capacity.

The latest full-year results (FY25, year to 30 September 2025) show continued profit growth:

• Profit before tax (PBT): up 9% to £665m
• Earnings before interest and tax (EBIT): up 18% to £703m
• Group revenues: up 9% to £10.1bn

The airline segment alone delivered £415m PBT, with the holidays business contributing much of the rest.

However, 2026 first-quarter results didn’t impress quite as much. It reported a £93m loss before tax (vs £61m a year earlier) following heavy investment in routes and capacity. If that expenditure doesn’t pay off, the next results could wipe up recent gains.

Still, passengers rose 7% to 22.7m, load factor improved to 90%, and available seat kilometres (ASK) grew 9%. 

For interested retail investors, the key is patience and keeping a close eye on the August deadline to see if any revised bids pop up, and monitor whether the board’s recommendation holds.

My take, and a possible alternative

As an easyJet shareholder myself, I’m holding my shares for now and keeping a close eye on the story. But when looking at the situation with a long-term view, I think it makes little sense for me to topp up my position now until the future is more clear.

Based on what’s happened in just the past few weeks, I doubt even the most eagle-eyed analyst could predict what comes next.

With that in mind, investors keen on UK air travel exposure might feel more comfortable considering a more stable, established company like IAG, owner of British Airways.

What income stock do we like better than easyJet Plc right now?

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Mark Hartley owns shares in easyJet.

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That means a £5,000 investment at last week’s low would have returned around £600 in just a few days!

That’s great news for shareholders like myself — but what does it mean for those who’ve been considering the stock?

Let’s take a look at what prompted the price surge and what could come next.

Why is this happening now?

It was announced this morning that easyJet has tentatively agreed to a £5.2bn takeover bid from US investment firm Castlelake. This comes after the airline turned down four previous offers, saying the firm was trying to buy it “on the cheap”.

The new offer, agreed upon at the weekend, values the shares at £6.90 each — around 13.3% higher than today’s price.

Naturally, that makes the company look strong. Castlelake wouldn’t be considering it if it didn’t think the business had long-term value.

But what the firm intends on doing with the airline will determine whether or not the shares are worth a closer look today.

Looking ahead

First, it’s worth noting that the deal isn’t anywhere near to being finalised. Castlelake still needs to confirm its final intention to buy, and then there’s the question of EU/US regulatory hurdles.

Moreover, once the offer is finalised, easyJet needs to put it to a shareholder vote. So it could all end up being a nothing sandwich.

But if it does go ahead, what could happen to the airline?

Reports suggest Castlelake would own just 49% of the company, with the remaining 51% owned by European investors to satisfy EU rules. This would result in a split private/public structure, which typically means a strong focus on cash generation and more aggressive capital structure engineering.

It may also lead to new partnerships, including possibly more consolidation within Europe’s low‑cost segment.

What it means for shareholders

Since the £6.90 share offer represents a substantial premium, there’s a chance many institutional holders will sell their shares at that price.

Castlelake has floated the idea of a partial equity option, allowing some shareholders to roll part of their holding into a private vehicle while maintaining exposure to easyJet.

This may or may not benefit shareholders, depending on any strategic changes and how they’re executed. Currently, it’s not clear what structure will be decided upon.

But as of now, it appears easyJet would remain listed as an entity on the London Stock Exchange.

Following the news, analyst reactions are mixed. Bernstein reiterated its Hold rating with a price target of 690p and JP Morgan reiterated a Sell rating with a 360p target.

Last month, UBS downgraded its rating to a Hold with a price target of 610p.

Final thoughts

The specifics of how the deal might pan out remains to be seen — if a deal goes through at all. If it collapses, the share price is likely to suffer short-term losses.

For that reason, I’d say it’s risky to consider the shares at this moment. However, there’s significant potential for further gains if everything goes ahead smoothly.

No doubt, shareholders will be keeping a close eye on developments. But other investors might want to look elsewhere for more concrete opportunities.

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?

Mark Hartley owns shares in easyJet.

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Look at the market for mergers and acquisitions, however, and a different impression may emerge. Would-be buyers – including many sophisticated global companies – have been queuing up to try and purchase UK firms.

That suggests that, in at least some cases, well-informed buyers may actually see well-known UK shares as offering good value.

Taking advantage of weakness – or spotting good value?

Take easyJet (LSE: EZJ) as an example.

It has recently received multiple offers from a single potential suitor.

So far it has not accepted any of them. It is, though, now providing some limited information to the company.

That suggests that easyJet’s board is taking the prospect of a possible takeover seriously, even if they are resistant to what is on the table so far.

The easyJet share price remains substantially below the most recently publicly revealed offer. I interpret that as suggesting that the City may have doubts about the likelihood of any deal being made.

The firm has described the bid as characteristic. In other words, the takeover approach may be taking advantage of a share price weakened in recent months by risks connected to the conflict in the Middle East, such as jet fuel price volatility and weakened demand for holiday air travel.

On the other hand, that is often the case when investing: buyers look to buy into a business when they see a potential mismatch between the price and what they believe its long-term value to be.

On the hunt for bargains

I think there is a lot to like about easyJet as a business.

It has a business model that, although somewhat seasonal, has proven it can be cash generative over the long run.  It has an established customer base, strong brand and future growth opportunities.

I have recently been buying the shares, in part because some of the risks I had associated with it in recent months look to me as if they may be receding. Jet fuel having become more affordable is a case in point.

But it is not the only UK share I have been buying over recent months in the belief that there is a mismatch between a business’s current price and what I think its long-term value ought to be.

I am trying to avoid buying shares just because they have a low price. Rather, I am looking for what I believe are excellent businesses but whose share price does not seem to reflect that accurately and fully.

Even in this market, while some investors fret about AI valuations and the prospect of a bubble, I see plenty of UK shares I think fit the bill.

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 owns shares in easyJet.

The post Could now be the time to buy great UK shares at bargain prices? appeared first on The Twelfth Magpie.

Wondering what’s going on? Here’s what you need to know…

Why’s the easyJet share price flying?

The share price strength here isn’t related to operational performance. Instead, it’s to do with the fact that easyJet has received a number of takeover offers from US-based private equity firm Castlelake. And there’s been an easing of geopolitical tension and oil prices have come down.

We first started hearing about the takeover interest back in late May. At the time, Castlelake said it was in the early stages of considering a proposal.

Since then, it’s made three non-binding proposals for easyJet, all of which have been rejected. These were at 560p, 600p, and 625p per share.

Following the rejection of the third proposal, Castlelake has publicly announced details of the offer today (22 June) in an effort to get easyJet shareholders to consider its merits and provide their views to the board ahead of a deadline on 26 June. It points out that the 625p offer represents:

• A premium of almost 60% to the easyJet share price before news of takeover interest emerged.
• A premium of 35% to the closing easyJet share price before the outbreak of the US-Iran conflict.
• A price above any closing easyJet share price since 25 February 2022.
• A price above all research analyst price targets published since 16 April.
• A price-to-earnings (P/E) multiple of 16.5 using the FY2027 earnings forecast.

In today’s announcement, the company says it believes this third proposal “substantially de-risks” the execution of easyJet’s business plan for investors. It adds that it plans to offer a partial equity alternative, allowing easyJet shareholders to remain invested in the airline as a privately held business in partnership with the firm.

Why aren’t the shares higher?

Now, what’s interesting is that, as I write this, easyJet’s share price is sitting at about 520p. That’s well below the third offer from Castlelake.

This suggests investors don’t see a deal going through. It’s worth pointing out here that a takeover might be difficult to get past regulators.

What’s the best move now?

In terms of what investors should do now, it’s a bit of a tricky one because the backdrop here remains complex. Not only are there geopolitical and oil price uncertainties, but consumer spending weakness is also a risk.

Personally, I don’t see easyJet shares as a buy to consider after their recent pop. There was definitely some value on offer a few months ago when they were trading near 350p. However today, a lot of that value has gone.

At the current price, the shares are trading at roughly 12 times next financial year’s earnings forecast. Given the risks, I wouldn’t want to pay more than that for this business.

But for those who own them already, holding on could be a move worth considering. Because there’s a chance that a takeover could happen. There’s also a chance that operational performance could improve now that oil prices are falling. Investor sentiment towards the shares could improve too.

That said, if Castlelake walks away from a deal, the shares could pull back. So selling a few shares today could also be an option to consider.

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?

Edward Sheldon does not hold any positions in the companies mentioned

The post easyJet shares are up 40% in a month. Here’s why appeared first on The Twelfth Magpie.

And, perhaps more importantly, is this a stock that’s worth buying on the dips? Having followed easyJet for years, I think it might be.

Takeover target

Let’s get the elephant out of the room… the takeover interest from US private investment consortium Castlelake. That hit the news on 29 May, and gave easyJet shares a nice boost. By the time of writing, it’s helped push the price up around 25%.

When the news broke, easyJet management made an announcement…

The board of easyJet has not had any discussions with, nor received any approach or proposal from Castlelake. The board is clear in its duty of aiming to maximise shareholder value and will consider any proposal, should one be made. In any assessment, the board will be especially mindful of its valuation and deliverability.

— 1 June 2026

So we have no idea what a potential offer might look like, or what premium to the current market price we might see.

So what’s it worth?

At the moment, we’re looking at a forecast price-to-earnings (P/E) ratio of 11.7. If we compare that with other airlines, we see Wizz Air Holdings on a forward P/E of 14.4. Flag carrier International Consolidated Airlines is on a forward multiple of only 8.6.

That makes me think the easyJet share price isn’t particularly cheap right now. And I’m not seeing much in the way of undervaluation that might make a cheeky low-ball bid from Castlelake plausible.

So if a bid does materialise, will it have to be high enough to make it irresistible to easyJet shareholders? I think it might.

Back on the ground

Meanwhile, analyst recommendations had easyJet shares on an average price target of 448p — before the approach rumours emerged. The price has already climbed well above that. But there’s still a bit of breathing room below the most bullish target of 574p.

Working out how the shares might move in the next few years isn’t easy. That’s mainly because brokers see the airline bringing home erratic earnings per share, but essentially remaining flat overall between now and 2028.

So, what should investors do now?

What a choice

Firstly, I’d never recommend considering buying shares based on a potential buyout. It’s just too short-term and too risky. And this one seems a long way from becoming reality. If it comes off, shareholders could do well.

But if nothing happens, I could see the shares sliding again. And it reminds me of the multiple times over the years I’ve thought about buying on the dips — and I really do think that’s something would-be shareholders should consider.

The thing that’s stopped me is my long-standing rule to never invest in an airline, because of their uncontrollable external risks. I’ve been seriously tempted at times — but on balance I think my rule has served me well.

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?

Alan Oscroft does not hold any positions in the companies mentioned.

The post Up close to 50% in a month, what’s next for the easyJet share price? appeared first on The Twelfth Magpie.

So what’s the story here and can the rally continue?

Proving resilience

There are two main factors that have helped the stock. The first one was the half-year results that came out in late May. On the face of it, some might have been unimpressed given the headline loss before tax of £552m was an increase from the £394m loss in the prior year. However, there were lots of positives to take from it.

For example, it recorded “a 6% rise in passenger numbers to 42 million and a 2% improvement in load factor to 90%”. More than that, liquidity was strong, with £434m in net cash. The CEO actually said that easyJet has “one of the strongest investment‑grade balance sheets in European aviation“.

This certainly helped to reassure investors at a time when the conflict in the Middle East was causing problems for fuel prices and customer demand.

Yet this flips to our second factor, as in recent weeks there have been signs of a peace deal with the US and Iran, which now looks like it has materialised. The optimism around this has been another factor boosting the company’s stock price.

The direction of travel from here

Clearly, some concerns about higher fuel costs, inflation, and weak consumer spending remain. So if these fears continue to ease, I think the stock has further room to rally.

It’s not like the company is overvalued. In fact, far from it. It has a price-to-earnings ratio of just 7.61. This is over half the FTSE 100 average ratio. When expectations are low, even modest improvements can spark a powerful rebound.

The stock could benefit from other factors, such as from its package holiday arm, easyJet Holidays. This has become an increasingly important growth driver, helping diversify earnings beyond simply selling seats. If demand stays healthy and the airline maintains pricing power, profits could keep surprising.

However, risks remain. We’re certainly not out of the woods yet with the situation in the Middle East. Any slowdown in consumer spending could hit bookings quickly. There is also the risk that the recent rally has simply moved too far, too fast.

Yet on balance, I don’t think this is the end of the runway for the easyJet rally. The stock’s still cheap and isn’t even at the highest level in the past year. With momentum likely coming from lower energy prices as the situation in Iran finally gets sorted out, I think it could keep going.

I bought the stock at the start of the month and feel it’s one investors could consider.

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?

Jon Smith owns shares in easyJet.

The post The easyJet share price is up 49% in a month. What on earth’s going on? appeared first on The Twelfth Magpie.

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.

The post At £5, could the easyJet share price still be a long-term bargain? appeared first on The Twelfth Magpie.

For a profitable, well-known airline with one of the strongest brands in European budget travel, this sounds like it could be a bargain. So, what’s holding me back from buying the shares today?

A cheap stock for a reason?

As I write on Monday morning (15 June), the shares are down about 7.5% over the past year and sitting at 509.4p. That’s despite the underlying business showing solid profitability in recent years.

A price-to-earnings (P/E) ratio of 9.8 and a 2.6% dividend yield from a business carrying more than 90m passengers a year looks like a value opportunity.

If you’re considering easyJet shares, it’s also important to compare the stock to peers like Jet2. Here’s a quick comparison between the two budget airlines:

But is there more to easyJet than meets the eye?

The clouds gathering over the sector

The company is a low-cost operator with over 350 aircraft operating in nearly 40 countries. It’s a powerhouse of short-haul travel but I think that’s where some of my hesitancy lies. 

The big thing on my mind right now is jet fuel. I’m thinking about both the cost and availability of this critical input for airlines. The ongoing Middle East conflict has driven crude and refined fuel prices sharply higher, and airlines are feeling it. easyJet chief executive Kenton Jarvis downplayed the potential impacts in the company’s half-year 2026 results.

We have seen no issues at the 165 airports we fly in and out of. We stay in constant contact with airports, governments and fuel suppliers, and what they tell us is that fuel supply is being diversified. That is why confidence is lifting that this summer we will be uninterrupted in our flying programme.

Lufthansa recently flagged nearly €1.7bn (£1.5bn) in additional fuel costs, while Ryanair’s chief executive warned that European carriers could fail if jet fuel prices don’t ease. Fuel is one of an airline’s largest costs, and a sustained spike flows straight to the bottom line. The new peace deal could be good news both on this level as well as a humanitarian one.

Then there’s the demand side. Consumer confidence in the UK remains fragile, and a meaningful economic downturn could hit discretionary spending hard. That includes holiday spending if consumers need to tighten the purse strings.

That said, it can’t be all doom and gloom. Is there anything on the other side of the equation to balance this out?

Reasons for cautious optimism

There are certainly some green shoots to consider if you’re evaluating the stock right now.

easyJet’s holidays division has been a standout performer, growing rapidly and diversifying earnings away from pure seat sales toward higher-margin package holidays.

The business also has a powerful competitive position as a result of its scale, brand recognition and cost discipline. This could help it to absorb fuel shocks better than weaker rivals and capture more market share.

If fuel prices ease and the UK economy avoids a sharp downturn, today’s valuation could look like a genuine bargain in hindsight.

My verdict

Despite plenty of potential positives, I’m not looking to add more cyclical exposure to my portfolio.

However, a durable resolution in the Middle East could be the catalyst to review not just easyJet but several other stocks on my radar.

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?

Ken Hall does not hold any positions in the companies mentioned.

The post Why I’m not buying easyJet shares… yet appeared first on The Twelfth Magpie.

What on earth happened? And should I be considering this airline for my portfolio?

Why did the shares initially tumble?

The sell-off was largely rooted in the Middle East conflict. When fighting escalated sharply in March, jet fuel prices spiked violently. Then in easyJet’s half-year trading update, published in April, management had confirmed that the rise in fuel costs alone added around £25m of unplanned expenses.

Combined with other headwinds, management warned that full first-half headline losses are expected to land between £540m and £560m – significantly behind prior analyst expectations.

With that in mind, it’s no wonder the easyJet share price took a tumble. But then why did it suddenly start bouncing back?

What sparked the recovery?

easyJet’s sudden rally wasn’t caused by a miraculous operational recovery. Instead, this newfound momentum stems from an opportunistic takeover bid.

On 29 May, US private equity firm Castlelake confirmed it was in the early stages of considering a possible offer for easyJet. A follow-up disclosure two days later revealed that Castlelake already holds 2.14% of easyJet’s issued shares, making it one of the largest single shareholders.

But this is where things get interesting…

Under the rules of the UK Takeover Code, Castlelake cannot offer less than 403.23p per share because of the price it paid to acquire its existing position. This essentially sets the floor of a potential buyout price. And since investors expect a far more generous offer to be made, the easyJet share price has since climbed even higher.

While the prospect of a takeover is certainly exciting, it’s important to highlight that no bid has officially been issued yet. And Castlelake has until 26 June to make up its mind.

Time to buy?

If the proposed acquisition price is significantly ahead of where easyJet shares currently trade, buying shares today could unlock significant short-term gains. The only problem is, this is pure speculation. There’s no guarantee an offer will be made or that management will accept if Castlelake does indeed decide to pull the trigger.

However, putting this takeover story aside, easyJet as a business seems to be structurally sound. The company holds net cash of £434m, has access to £4.7bn in liquidity, and owns 86% of its fleet outright. Summer bookings are 63% sold and the holidays division is also delivering 22% customer growth year on year.

In other words, easyJet isn’t struggling due to a lack of demand, but rather runaway fuel prices. The company has hedged around 70% of its fuel at a price of $706 per metric tonne compared to the $1,500 spot price. But hedges don’t last forever. And for every $100 increase in average fuel costs, easyJet estimates £40m of additional expenses will be incurred.

So what should investors make of all this? The easyJet share price is caught between genuine operational headwinds and a potentially opportunistic takeout story. That is a fascinating but uncomfortable combination for investors.

And for my portfolio, it’s not a stock I’m rushing to buy even with a possible takeover coming around the corner.

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?

Zaven Boyrazian does not hold any positions in the companies mentioned.

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

There’s some evidence to suggest that it could be 85% undervalued. Others say its shares are too expensive. Let’s discuss.    

Divided opinion

When the US investment firm let it be known that it was interested in buying Britain’s largest airline (in terms of passenger numbers), it clearly thought there was value in the company at around 400p.

It would also have been aware that when the news was announced, easyJet’s share price would go up, increasing its price tag.

However, it appears as though the majority in the City don’t consider the airline to be a bargain. Analysts have an average 12-month share price target of 430p. In other words, based on today’s (11 June) price, they think the group’s around 10% overvalued.

But there’s at least one notable exception. Earlier in June, Citi said the airline’s fleet was worth £4.25bn-£5.25bn, taking into account the age of its planes. When adjusted for cash and non-lease debt, the US investment bank said the group’s market-cap is 60%-85% lower than the value of its owned assets.

Admittedly, this back-of-the-envelope calculation isn’t intended to be too scientific. But it does suggest easyJet’s shares are somewhere between significantly, if not massively, undervalued. It could also draw others into a battle to own the group.

What now?

Castlelake has until 26 June to decide what it wants to do next. According to an Italian newspaper, it’s looking to partner with MSC, the world’s largest shipping group, to help fund a deal and ensure compliance with European Union ownership rules.

Understandably, easyJet’s board was dismissive. It described the approach as “highly opportunistic” given that the group’s share price was “temporarily depressed” due to the conflict in the Middle East.

The company’s directors pointed to the airline’s “investment grade” balance sheet and net cash position as evidence of its financial strength.

Buying shares due to takeover speculation isn’t a good idea. As easyJet warns: “There can be no certainty that an offer will be made…” Should Castlelake walk away, there could be a sharp drop in the airline’s share price.

And they might do this if they decide that the continuing blockade of the Strait of Hormuz — and the impact on jet fuel prices — could damage the aviation industry. They might also determine that they could better deploy their cash in industries where the return on capital is far higher.

My view

However, I believe easyJet has lots going for it. Indeed, its shares look to offer good value to me.

Flying to 163 airports in 37 countries (1,202 routes), it has a huge number of valuable slots. In addition, its package holiday business is doing well (I know, I’ve just returned from one). Also, its fleet of 356 planes is relatively young, with another 290 on order. In addition, it claims to have a lower per kilometre cost than Lufthansa, Air-France KLM, and International Consolidated Airlines.

The trouble is, I have finite cash resources. And yet there are so many UK shares that I like would like to own. I can’t buy them all. Even so, I believe easyJet’s a stock to consider.

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?

James Beard does not hold any positions in the companies mentioned.

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