Actually, I’ve already bought easyJet (LSE: EZJ) shares. It was one of my pandemic purchases, because its price was too low for me to ignore. But the sharp increase in the easyJet share price raises the question – would I buy the EZJ share (again) now?
Why’s the easyJet share price rising?
There are mounting reasons to buy the EZJ share. A clear end in sight for the lockdown by June is the most recent one.
It’s no coincidence that the easyJet share price is a big gainer in today’s trading. Britons are making holiday bookings at speed and EZJ’s flight bookings from the UK have risen by 300% since the lockdown relaxation schedule was announced.
As I write, its share price is up 8% from yesterday’s close.
But even before that, the easyJet share price had been on the rise since the vaccines were developed. It’s share price is up 60% since then. There have been hiccups along the way, but broadly the share price trajectory has been upwards.
Will it continue to rise?
I think there’s a good chance that the easyJet share price can continue to increase from here. There are two reasons for this.
One, its share price is acutely sensitive to developments in the broader environment and at the company itself. This showed up both in the dramatic drop when the market crash happened in March last year, and the sharp pickup on hopes of recovery since November.
However, this sensitivity is a drawback only as long as good news is followed by bad news and so on. Considering that we are unlikely to go into lockdown again, I think we will see more positive news than negative print for the company. As a result, I think upward momentum for the easyJet share price is possible now. And this is especially because it’s a news-sensitive stock.
What can go wrong?
But the risks to the easyJet share price are just too big to ignore, too. The company’s financial position has been shaken severely and it’s under increased debt now as well. It could take a few years for it to get back to its pre-pandemic levels. I think shaky financials are always an investing red flag. They can also explain indifferent share price trends.
Moreover, while the initial signs look good, we’ll know the economic slowdown’s impact on travel only later in the year. If there’s a big slump, travel’s likely to suffer. It may suffer less than in 2020, but feel the impact nevertheless. Also, some business travel could be replaced by video-conferencing for good.
Takeaway for the easyJet share price
I see the upside to easyJet as stronger than the risks to it at present. I think its share price will continue to rise for now. But the easyJet share price could hit a plateau after some time, maybe the next few months, as it starts looking more expensive. It’s one I’ll hold for the long term.
Manika Premsingh owns shares of easyJet. 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.
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