The stock is 45% lower than it was five years ago and 65% below its pre-pandemic highs. And there’s an important lesson here for investors.

What’s the latest?

Castlelake – a US-based investment firm – already owns around 2.14% of the FTSE 250 airline. And it says it’s considering an offer for the rest. 

The offer would be for at least 403.23p per share. But that’s already below the level the stock closed at yesterday.

There’s another ownership complication. European airlines have to be majority-owned by investors within Europe. 

Ryanair CEO Michael O’Leary pointed this out when Elon Musk made noises about buying it. But it’s also an issue for Castlelake.

Given all of this, it might be a surprise that the stock has gone to 427.60p. The real story, however, might just be beginning.

A takeover target?

I doubt Castlelake is going to buy easyJet. But the firm’s interest might force other potential buyers to show their hands.

I’m not thinking of other private equity firms. I mean other airlines that might have a strategic interest in easyJet’s assets. 

The firm has bases at Paris Charles de Gaulle and London Gatwick. And these are very valuable to an airline. 

Runway slots at busy airports are limited and in high demand. And easyJet’s might be genuinely attractive to a competitor.

That’s where I think a real takeover might come from. But Castlelake’s speculation might jolt some other buyers into life.

Opportunities 

According to easyJet, the takeover interest is highly opportunistic. The stock is down due to higher jet fuel prices. 

There’s some truth to this, but it’s only part of the story. There’s also a balance sheet issue to pay attention to.

Ryanair just paid off the last of its bonds. Meanwhile easyJet still has £2.9bn in debt weighing on its share price. 

Source: Fiscal.ai

The firm has almost twice as many shares outstanding as it had before Covid-19. Ryanair’s share count, by contrast, is lower.

This is why the share price is low. Jet fuel prices aren’t helping, but the real reason goes back much further than this.

Five-year returns 

Over the last five years, easyJet’s share price has turned £10,000 into £5,437. And that’s not just about this year’s jet fuel prices. 

Travel demand might have recovered sharply after Covid-19. But the damage to the business is more durable. 

The lesson for investors is that buying falling shares indiscriminately isn’t a strategy. Looking at the underlying business is vital.

Castlelake might be looking to take advantage of a low share price. But I don’t see anything wrong with that.

It does mean, however, that investors who bought the dip five years ago are in danger of not getting their money back. 

What next?

It will be interesting to see what happens next. Castlelake’s interest might draw other potential buyers out of the woodwork.

Equally, however, the takeover interest could evaporate entirely. So investors need another reason to think about buying the stock.

Is there one? The share price is down and it has some valuable assets, but my view is that there are more attractive opportunities to consider elsewhere.

Stephen Wright has no position in any of the companies mentioned.

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Short-term pressures

US interest in a bid for easyJet isn’t especially surprising. UK equities often trade on lower valuations than their US counterparts, and that gap tends to attract opportunistic buyers.

The stock has also had a difficult year. Rising fuel costs, geopolitical tensions in the Middle East, and uneven demand across European travel markets have all weighed on sentiment.

As a result, easyJet has been trading on a depressed valuation relative to its longer-term earnings potential. That reflects not just short-term pressure, but wider concerns around margins and airline cyclicality.

So when takeover speculation emerges, even at an early stage, the reaction can be immediate. Investors start to reassess whether the market has overreacted.

But the key question remains. Is this the start of a genuine strategic re-rating for easyJet — or just another speculative bounce in a heavily beaten-down airline stock?

The investment case beneath the headlines

While takeover speculation has driven today’s share price move, the underlying question is why easyJet might attract interest in the first place.

On the surface, the airline business is still operating in a difficult environment. Fuel prices remain volatile, geopolitical tensions have disrupted demand patterns, and forward bookings have softened at points in the year. That combination has weighed on sentiment and helped keep the valuation relatively subdued compared with historical levels.

But beneath that short-term noise, the business itself is still evolving. The budget airline continues to scale aircraft utilisation, grow ancillary revenues, and shift more of its network towards higher-value routes and holiday packages.

At its H1 results, management highlighted improving operational metrics, including higher load factors, stronger digital engagement, and growing contributions from easyJet holidays.

Importantly, the group also points to a clear medium-term strategy aimed at improving margins. Fleet modernisation is expected to drive around £250m of cost efficiencies over the next two years. In other words, the current earnings profile may not reflect the longer-term cash generation potential of the business once these investments mature.

That gap between short-term earnings pressure and longer-term earnings potential is exactly the type of disconnect that tends to attract strategic or financial buyers.

The key question is therefore not whether easyJet is under pressure today — but whether that pressure is temporarily depressing a structurally improving platform.

Bottom line

Airlines, as Warren Buffett has pointed out, are not known for being reliable wealth creators over the long term. Even IAG in the FTSE 100 has delivered a stronger recovery profile in recent years.

For my own part, despite the takeover speculation and signs of operational progress, easyJet shares don’t really fit my risk profile. Airlines remain highly cyclical and even periods of apparent strength can quickly reverse when conditions turn.

So while the valuation and takeover angle may be tempting, I’m cautious about viewing this as the start of a lasting re-rating rather than simply another phase in a volatile sector.

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?

Andrew Mackie does not hold any positions in the companies mentioned.

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For the six months to 31 March, the budget airline just (21 May) posted a headline loss before tax of £552m. That’s even worse than the £394m loss in the first half of last year. But back then, there was no Iran conflict pushing fuel prices through the roof.

And even before that, Covid, Ukraine war, soaring inflation… are not the things to get people spending money to jet away for holidays in the sun.

Nearing a pivot?

Despite conflict in the Middle East creating near‑term uncertainty, easyJet is well placed to manage the current environment, supported by one of the strongest investment‑grade balance sheets in European aviation.

— CEO Kenton Jarvis

That statement by the CEO falls very much into the category of putting a brave face on it, I’d say. And he added the company aims “to bounce back from this year’s Middle East-related setbacks, and then further progress towards our medium-term financial targets and deliver attractive shareholder returns as the operating environment normalises.“

Can easyJet weather the storms? One thing stands out to me in the boss’s statement — his mention of the balance sheet. Liquidity is what’s needed to see a company through a tough spell. And that appears fine to me.

We’re looking at adjusted net cash of £434m — excluding lease liabilities, but I think that’s fair. And easyJet enjoys total liquidity of £4.7bn, with assets worth a book value of £5bn.

The questions to ask

Other than the balance sheet, to be honest, I don’t think this current set of results really means much. Investors need to look beyond this year. And for me, that means a handful of key questions…

• Is there enough liquidity for the short term? Yes.
• Does the industry have good long-term potential? Yes.
• Is easyJet one of the best managed airlines in the business? Yes.
• Do earnings and valuation forecasts look attractive? Yes.

Those are my personal, subjective, answers. But I feel fairly confident in them.

On the valuation front, forecasts put easyJet’s full-year price-to-earnings (P/E) ratio at around 11.5. And that might not exactly sound screamingly cheap. But then earnings forecasts would drop that to under five by 2028 — and is that a scream resounding in my ears?

What to be careful of

I do see a couple of red flags, mind.

Where do the City analysts get those figures? They must surely base them on how a normal year for easyJet should look in the absence of today’s threats. And what a normal world of aviation might be like when not blighted by global conflict. Those scenarios are not without risk.

And of course, airlines can be very volatile businesses, held hostage to all manner of difficulties outside their control. That’s why I’ve never bought airline shares.

But you know what? I’m genuinely considering easyJet shares right now. There’s always a first time. And with the price so far down, this might be it.

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 After a tough first half, is it time to buy easyJet shares while they’re down? appeared first on The Twelfth Magpie.

Dividends have helped soften the blow. But even including those payments, the total loss still stands at a painful 55.9%, turning £1,000 into £441.

That’s a difficult track record to ignore. But with the stock now trading near multi-year lows, could all this uncertainty be quietly creating a hidden buying opportunity?

What’s weighing on the business right now?

The near-term picture for easyJet is genuinely challenging. The ongoing conflict in the Middle East has sent jet fuel prices soaring, and the business has already warned that its first-half headline pre-tax loss will come in between £540m and £560m. That’s a significantly larger loss compared to the £394m reported a year ago.

Around £25m of that deterioration came directly from unhedged fuel costs in March alone. And with forward bookings running below last year’s levels at 63% versus 65% in 2025, the demand picture is cloudier than management would like.

CEO Kenton Jarvis acknowledged as much in the company’s April trading update: “The conflict in the Middle East has introduced near-term uncertainty around fuel costs and customer demand. As expected, the booking curve has shortened in recent weeks, resulting in lower-than-normal forward visibility.”

Those are genuine risks that investors need to weigh carefully. But with pessimism driving the decision-making, has a hidden opportunity emerged?

Could the recovery be closer than it looks?

Despite the headwinds, there are reasons to think the worst may already be priced in, with the business entering into this difficult period from a position of genuine financial strength.

It has £4.7bn of liquidity, holds an investment-grade balance sheet, and has 70% of its summer fuel requirements hedged at $706 per metric tonne. That’s well below the current market prices, providing some meaningful short-term protection while the geopolitical picture evolves.

Looking at the latest forecasts, earnings per share are expected to rise by a 13% annualised rate over the next two years. In other words, the experts believe the current headwinds are ultimately a cyclical rather than a structural problem.

So much so that the consensus share price target for easyJet shares currently stands at 445p – roughly 29.4% higher than where the stock’s trading today.

Is now the time to act?

There definitely appears to be a material gap between what the experts think easyJet is worth and where the shares are trading today.

However, personally, I’m not tempted just yet. The uncertainty around fuel costs and demand visibility makes it difficult to know whether we’re near the bottom of this cyclical downturn or if there is more room to fall.

It’s definitely a stock I think investors should keep a close eye on. But for now, I think there are more exciting opportunities to explore elsewhere.

Zaven Boyrazian has no position in any of the shares mentioned.

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The budget airline has suffered blow after blow. Covid crushed global travel demand, fuel costs surged after the Ukraine invasion, the cost-of-living crisis squeezed consumers, and fierce competition kept fares under pressure.

Anybody who bought the shares in March 2015, when they peaked at 1,584p, will be sitting on a 79% loss today. The stock’s continued its descent, falling almost 40% over the last 12 months.

Unsurprisingly, the Iran crisis has piled more pressure and rattled investors again. Today (18 May), Brent crude hit $111 a barrel on fears of summer shortages. No prizes for guessing the impact on the easyJet share price.

Can it bounce back like Rolls-Royce?

easyJet’s first-half results (16 April) showed the conflict had already added £25m to fuel costs. That was purely in March, the final month of the half-year period.

easyJet holidays still performed strongly and load factors edged up to 90%, but bookings weakened as customers tightened their belts. The group expects to report a first-half underlying pre-tax loss of £540m-£560m, well below market forecasts of £421m. Net cash stood at £434m, but presumably not for long. The trailing dividend yield is 3.95% but cuts are surely on the way. The forecast for 2026 is 1.75%.

Investors considering the stock today need strong nerves. Some may be emboldened by memories of Rolls-Royce Holdings. That’s the FTSE 100 recovery stock par excellence.

Rolls struggled for years, but it’s problems came to a head during the Covid pandemic in 2020, when grounded fleets smashed revenues from aircraft engine maintenance. It was in a far worse state than easyJet, scrambling for cash just to survive. Then air travel returned, engine flying hours recovered, new CEO Tufan Erginbilgiç waltzed up and the shares took off like a rocket. Could a similar recovery story unfold here?

How bad will the summer be?

My answer is possibly, but not yet. easyJet runs on tight margins and typically spends around a quarter of revenue on fuel costs. That leaves it more exposed to oil price swings than most rivals. It’s bad luck that the group also happens to be investing heavily in upgrading its fleet. The spend, combined with the oil price spike, threatens to push free cash flow into negative territory.

Yet easyJet has assured customers that it expects to operate a full summer schedule, despite Iran. Let’s hope it pulls that off. Investors looking at the group’s rock-bottom price-to-earnings ratio of around five may wonder whether it’s just too cheap to resist.

I think the shares could take off one day. Possibly even like a rocket. Just not yet. Rolls-Royce had to endure years of punishment before its turnaround arrived, and easyJet investors may well need the same patience. I won’t be buying them today but, at some point, I think there’s real excitement on offer here for investors who are up to the challenge. I’ll be watching easyJet closely. Will you?

Harvey Jones has positions in Rolls-Royce.

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I see good arguments on both sides of that debate and the reality is that nobody is able to time a crash in advance with certainty.

It is going to happen – we just do not know when.

But while many investors feel a shiver down their spine when they hear the word crash, it need not always be a bad thing.

Indeed, for a small private investor with some spare cash to put to use, it can actually present a brilliant opportunity to try and build wealth.

The small investor’s advantage

Something that can get overlooked is that professional investors do not have all the advantages.

When the stock market plummets, their hands may be tied. They can have cash obligations they need to meet, or clients pulling money out their funds can force them to sell shares at fire sale prices.

By contrast, a small private investor who is beholden to nobody can act as they choose during a crash.

They do not have fundholders, managing directors and finance departments breathing down their necks the way a pro might. So, they can act in what they think is the best way to seize the opportunity.

A crash can be a bargain-hunting opportunity

What exactly is that opportunity that I keep mentioning?

Put simply, it is a temporary imbalance between what a brilliant business is worth for the long term and what its current share price suggests it is worth.

In theory, the stock market ought to be able to price companies accurately based on currently available information.

In practice, there is debate about how efficient that market pricing mechanism is, even in normal conditions.

During a stock market crash, prices can move around wildly.

In some cases, that mirrors rapidly shifting prospects for a given business. But in other cases, prices move around far more than a business’s long-term prospects do.

Such volatility can therefore offer an opportunity to scoop up shares in brilliant businesses at bargain prices.

But such windows of opportunity can be short-lived. A savvy investor therefore spends time well before the storm deciding what might be on their shopping list when the stock market next has a fit.

Putting the theory into practice

As an example, think about no-frills airline easyJet (LSE: EZJ).

In under three months back in 2020, the easyJet share price fell by more than two-thirds.

Did that make sense?

Uncertainty about demand for air travel during the pandemic was playing havoc with different investors’ expectations for the business. easyJet has a lot of fixed costs, including maintaining a fleet of aircraft whether it flies or not.

But it also has a proven business model and strong brand.

The brave were rewarded. The shares surged 78% in weeks in summer 2020. They then fell again, before doubling between October 2020 and the following May.

Today easyJet faces the risks of weakening passenger demand and higher fuel prices caused by the Middle Eastern war. The share price is down 35% so far this year.

So, it is not on my shopping list right now, as fuel price volatility could linger. But who knows wh ther it might get back on my watchlist in the future.

Instead, today I am hunting for brilliant shares to keep on my watchlist before the next stock market crash.

C Ruane has no position in any of the shares mentioned. The Twelfth Magpie 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 and Hidden Winners.

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The share price has tumbled 31% so far this year and now sells for just five times earnings.

But as a long-term investor, I am taking a wider view of things. Clearly, easyJet is suffering major turbulence at the moment, as are many of its industry peers. But could that potentially offer an attractive share price from a long-term perspective?

Immediate pain, and more pain to come

The Middle Eastern conflict has hurt civil aviation in multiple ways. Expensive jet fuel eats into profitability. easyJet has agreed the purchase price of much of its fuel needs in advance. But that does not cover all of the airline’s requirements and current agreements will only last for a matter of months, in any case.

Passenger demand on some routes has fallen and that could happen more broadly as nervous flyers decide to give air travel a miss during a war. Meanwhile, the global economy is weakening. That may lead more passengers to decide to holiday closer to home rather than venturing far away.

Not only are these negative factors, but they will not go away any time soon. In terms of jet fuel pricing, travellers’ confidence and economic performance, the damage has already been done.

Even if the war ends imminently, it will take months or even years for its impact in these areas to unwind.

easyJet looks well-positioned for the long run

easyJet has already told investors to buckle up as we are in for a bumpy ride. It has said it expects a headline loss before tax of £540m- £560m for the first half. That is equivalent to around a fifth of its entire market capitalisation.

Will that be the extent of the financial fallout for the company from the current Middle Eastern crisis, or could there be more to come? Nobody knows for now. Only time will tell.

easyJet has been through tough times before, notably during the pandemic. Its shares crashed by around 70% over a couple of months in the first half of 2020. But they then more than doubled in just over a year from that low point.

The business has a playbook for handling this kind of disruption. It has net cash of over £400m and more than 10 times that in liquidity, meaning that if it needs to borrow more cash to fund operations it ought to be able to do so.

With a historically-proven business model, strong brand and extensive route network, I think the airline looks well set for recovery at some point, provided the current crisis does not drag on for too long.

Why buy now?

On that basis, I believe that easyJet shares at their current price could well turn out to be a long-term bargain. However, there are a lot of unknown factors here that are outside the firm’s control. Things could get worse before they get better.

On that basis, I am in no rush to invest. I would rather wait for a while and see how events develop rather than tie up my money now in a company that continues to face multiple challenges of an uncertain duration.

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A hit from fuel prices

I’m talking about easyJet (LSE:EZJ). Over the past year, the share price is down 34%, with the bulk of the move coming in 2026 so far. A major factor has been the spike in fuel prices, driven by higher oil prices. In fact, the half-year update last month showed £25m of additional fuel costs due to the Middle East conflict, contributing to a much wider-than-expected loss. At the same time, wages and other operating costs have remained elevated, also hampering profit margins.

Given that fuel is such a significant contributor to the company’s operations, it’s clearly a significant risk going forward. However, I don’t think it would take much for the stock to get back to levels seen at the start of the year.

The case for a rebound

For starters, demand is still very much alive. Summer bookings are strong, and the airline continues to benefit from resilient leisure travel trends across Europe. More importantly, easyJet Holidays is doing very well, with customer numbers increasing by 22% in H1 compared with the same period last year. It’s becoming a major profit engine and offers higher margins than the core airline business. This means that even if fuel prices remain elevated, the stock could still rally, with more diversified revenue streams.

However, the main reason I think the stock could climb back to January levels is a resolution in the Middle East. The conflict has stalled, with a ceasefire in place and a lack of desire from all sides to escalate (in my view). I struggle to see the global supply chain route through the Strait of Hormuz not operating at full capacity for much longer, as it damages all sides.

If this proves correct, fuel prices should fall as oil moderates, helping reduce easyJet’s costs almost overnight. Given that this is the largest factor negatively impacting the share price this year, I think the stock could trade back to the levels seen in early January at 522p, before the conflict began. From the current price of 366p, this would be a 43% increase. Based on a £2k investment, this could be worth £2,860.

Weighing it up

Of course, my subjective view on a war resolution could be wrong, which is the biggest risk to a rally in the easyJet share price back to the levels seen pre-conflict. However, even if the stock doesn’t climb 43%, I do believe it’s cheap. The price-to-earnings ratio is 5.17, well below the fair-value benchmark of 10 I use. Therefore, with a Foolish long-term investment outlook, I do think it’s a stock for investors to consider.

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You can imagine my chagrin when a certain orange-coloured individual decided more war was needed in the Middle East. The awful humanitarian consequences of the Iran war are the worst part, of course. But it’s having ripple effects on businesses and economies and not all of the negative effects have been felt yet. Among the early losers have been airline stocks, just like the one I bought recently!

Cheap buying opportunity?

Following the start of the conflict on 28 February, the easyJet share price fell 27% in just over a month. The FTSE 100 only fell 9% over the same timeframe, which shows just how much more affected the airline was.

So what’s going on here? Incredible buying opportunity for an already cheap-looking stock? Perhaps…

For one, things might be turning around. The share price is actually up over 10% since the start of April. A £10,000 stake would have turned into £11,083 in double-quick time. More good news regarding the conclusion of this conflict and that could just be the start of things.

And the falling share price has pushed the valuation down to levels almost unheard of. The current price-to-earnings ratio of 5.88 is almost as cheap as it gets on the FTSE 100. It’s very rare for a figure to stay that low for long.

My decision

Are there risks? Absolutely. Even if the Iran conflict gets wrapped up soon (hopefully) there will be lingering consequences. The price of oil is not likely to fall back down to previous levels. Jet fuel is one of the biggest considerations for the margins of airlines.

The conflict is having an effect on consumer behaviour too. In the early stages of the war, folks were booking flights closer to home rather than far-flung destinations – remember the Middle East is a travel hub for those wishing to visit Asia and Australasia. The latest news suggests people are opting for holidays in the UK rather than going abroad too. Lower demand for flights is bad for any airline, but especially low-cost ones like easyJet that operate on wafer-thin margins and high volume.

My decision? I have no intention to sell, and believe this could be a stock worth considering for the right investor. I will say that it’s one of the riskier elements of my portfolio due to the ongoing nature of global events. Some may wish to steer clear for those reasons.

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There is an obvious reason for that: the Middle East war threatens to see passenger demand fall, while jet fuel prices have surged. It expects to report a headline pre-tax loss of between £0.5bn and £0.6bn for the first half of its current financial year.

Still, easyJet has triumphed through adversity before.

The pandemic hammered the shares, but they went on to more than double between October 2020 and April of the following year.

In just six months, that meant a great return for investors who had been brave enough to buy when the market had pushed the share price down.

Can easyJet ride the latest storm?

Just because something has happened before does not necessarily mean it will happen again.

History is littered with airlines that have successfully navigated multiple crises – until they met one that they could not survive.

Having said that, I am fairly upbeat about the medium- to long-term outlook for easyJet.

It has a well-honed, proven business model. Even if passenger demand does fall temporarily, when it bounces back I reckon the carrier is well-positioned to benefit from it.

Anyway, in its most recent quarter, the company said that “strong late demand for domestics, cities and the Western Mediterranean offset war-related softness in Egypt, Turkey and Cyprus”.

This looks pretty tempting to me

Plus, easyJet has entered the latest challenging period for aviation in good financial shape. It has net cash of £0.5bn with a lot of additional liquidity (like agreed borrowing capacity) it can call on should it need to.

The company has also hedged 70% of its summer fuel needs, meaning that even if prices go up it will not pay more for that percentage of its fuel needs. Still, costs could potentially soar on the unhedged 30% depending on what ongoing Middle Eastern uncertainty means for the oil market.

From a long-term perspective, I feel confident the carrier can ride the current storm. In fact I think its current price undervalues the long-term potential and could end up looking like a deep bargain a year or two from now.

I’m watching, but not in a hurry

Still, I am hesitant.

Airlines can often look like terrific bargains when the chips are down – but they may still turn out to be horrible investments.

There are some simple reasons for that: passenger demand and fuel costs are often outside airlines’ control, even though they can hedge their fuel costs in the short term. The industry is competitive and complex. Running costs are high, even when planes are not well-utilised.

I am going to wait a bit and try to get a firmer idea of whether the current short-term challenges for easyJet and its peers look set to end soon, or develop into more enduring problems.

Cheap though easyJet shares look, I am not ready to buy any just yet.

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