EasyJet Shares Appear Very Cheap, but Cost Pressures and Economic Uncertainties Loom

EasyJet returned to profitability for the first time since the start of the coronavirus pandemic as the group expects to generate headline profit before tax of GBP 480 million in the fiscal fourth quarter, which is just short of the GBP 528 million generated in the same quarter before the pandemic. A headline loss between GBP 170 million and GBP 190 million is expected for the full year, reflecting the challenges faced earlier in the year such as travel restrictions, the war in Ukraine, and staff shortages across the industry. We maintain our GBX 915 fair value estimate. Shares have dropped sharply, in line with peers, as investors avoid industries sensitive to inflationary pressures and economic headwinds.