EasyJet Very Confident About the Recovery; Shares Grossly Undervalued

EasyJet reported first-half 2022 results with an optimistic tone, confirming the positive outlook for summer 2022 communicated in the recent trading update. The airline expects summer capacity to reach 97% of 2019 levels at load factors exceeding 90% in the fourth quarter, which compares with 95% precoronavirus. Yields are looking healthy, coming in 9% higher in first-half 2022 than in first-half 2019 and are 15% higher than prepandemic levels for forward bookings in the fourth quarter. This is a deviation from Ryanair, which warned of lower yields earlier in the week. With unit costs expected to reach 2019 levels in the second half, we expect strong profits in the second half of fiscal 2022. No guidance has been provided for fiscal 2022, but management expects to reach prepandemic EBITAR margins in the midteens over the medium term. We believe EasyJet is well positioned to benefit from the continued recovery over the summer and beyond, and we see shares as attractively valued compared with our GBX 915 fair value estimate.