Will EasyJet’s share price climb higher after half-year results?

EasyJet’s share price soared at the beginning of the year, yet it now finds itself in something of a holding pattern. Upcoming half-year results could help the stock take off once again. But with the carrier having already forecast positive results in an April trading statement, a lot of the good news could already be priced in. Still, EasyJet shares remain well off pre-pandemic levels and with the airline industry in recovery mode, there could be gains over the long-term.

EasyJet’s [EZJ.L] share price has gained over 50% this year, closing Friday, 12 May, at 488.8p. That easily outpaces rival Ryanair’s [RYA.IR] still respectable 28.26% gain over the same timeframe. Considering just how far EasyJet shares have climbed, investors might be wondering if there’s any more blue sky ahead, or if the stock is about to enter a tailspin.

Despite the impressive gains, EasyJet’s share price has been trading in a narrow band since 10 February, with shares cruising between 460p and 520p. The stock has also declined over 6% since 18 April, when the low-cost carrier announced what appeared to be a positive trading update forecasting half-year results.

EasyJet will release its actual half-year results this week. Will it provide enough fuel for the stock to regain altitude?

What to expect in EasyJet’s half-year earnings 

Arguably a lot of what’s to come in the half-year results has already been priced in, thanks to the half-year trading statement published in April.

In that statement, EasyJet said it expects revenue to have gained 80% year-on-year to £2.7bn, with passenger revenue up 74% to £1.8bn. Pre-tax losses are expected to come in between £405m and £425m, down from £545m for the same period the previous year.

In the second quarter, passenger numbers are expected to jump to 15.6 million, up from 11.5 million in the same quarter last year. This number has been boosted by strong demand over the Easter holidays.

“We see continued strong booking momentum into summer as customers prioritise spending on travel and choose airlines like EasyJet,” said EasyJet CEO Johan Lundgren.  

In the update, EasyJet increased its full-year earnings guidance. The low-cost airline now expects to exceed analyst profit expectations of £260m for the full year.

Will EasyJet’s share price move post-earnings?

 With so much already known about what to expect in the half-year results, EasyJet’s share price might not move too much post-earnings. Yet, in the medium to long term, the stock could continue to gain altitude as the airline industry recovers.

Brokers at Liberum upped their price target on EasyJet from 500p to 650p, following the April trading statement. The revised target suggests a decent 33% upside on Friday’s close.

“Macro risks to demand have been shrugged off, supporting our thesis that the lag in industry capacity restoration has left plenty of headroom for further recovery,” said the brokers at Liberum.

That headroom is reflected in the fact that EasyJet’s share price is still far from pre-pandemic levels. In February 2020 the stock was trading at over 1,500p a share.

EasyJet has a median 12-month target of 580p from analysts. Hitting this would see a 18.7% upside on Friday’s close.

Nevertheless, there are a couple of headwinds to take into account. Prices have increased with the rise in fuel costs. These will continue to be passed on to customers who, for now, seem willing to pay: Ryanair boss Michael O’Leary predicts that airfares could rise 10-15% this year. Bookings are expected to remain strong over the summer.

However, the rise in the cost of living could see demand eventually falter as customers prioritise spending.  

Any commentary around this in EasyJet’s half-year results will be worth paying attention to.