The easyJet (LSE: EZJ) share price is suddenly flying. It’s up 12% in a month. Over 12 months, it’s climbed more than 28%. So what’s driving the surge?
I’ve had my eye on the FTSE 100 budget carrier for the last year. EasyJet shares have routinely looked cheap, with a price-to-earnings (P/E) ratio sitting in the mid-single-digits.
Its newer Holidays division has been doing good business, while flight bookings and revenues have been rising.
Recovery stock
I was torn for a while between easyJet and FTSE 100 rival International Consolidated Airlines Group. IAG, as it’s known, took off last year as transatlantic travel boomed, but Europe-focused easyJet lagged.
When the IAG share price dropped after Donald Trump’s tariffs rattled markets, I pounced. I’m now sitting on a quickfire 30% gain, so I’m not complaining. But I still find myself glancing at easyJet, while wondering whether it’s wise to increase my exposure to the airline sector and buy that too.
On 22 May, easyJet posted a half-year loss before tax of £394m, which didn’t shock anybody. That’s normal in this seasonal business, where the real money is typically made in the second half of the year.
The good news was that 80% of seats were already sold for the third quarter, a strong position heading into peak summer. The company said it remains on track to meet its full-year 2025 profit target of £703m. That’s the figure from a company-compiled analyst poll, and it seems achievable given current booking trends.
Flight demand is strong enough to support prices. Load factors are also up, which is key when flying aircraft. And lower oil prices are giving a helping hand.
Analyst upgrade
EasyJet enjoyed another boost on 3 June when RBC Capital Markets upgraded it to Outperform and lifted its price target from 570p to 650p. Today, it stands at 560p.
The broker sees solid UK travel demand, and expects easyJet’s internal profit measures, such as Holidays expansion and more fuel-efficient planes, to deliver real progress from 2026.
RBC now forecasts headline pre-tax profit of £791m for 2026, above consensus of £762m.
Eyes on value
Risks remain. Airlines are vulnerable to all sorts of external shocks, such as war, recession, weather and air traffic controller strikes.
They have high fixed costs and, as we saw in the pandemic, if people stop travelling, profits vanish quickly. European consumers aren’t especially confident, as the continent’s economy continues to idle.
The median 12-month share price forecast from 19 analysts is just under 705p. That’s even higher than RBC’s prediction, and would mark a 20% lift from today, if it happened.
That kind of growth would turn a £10,000 into £12,000, with dividends on top. The shares also offer a forecast yield of 2.42% this year, rising to 2.63% in 2026.
Out of 21 analysts covering easyJet, 13 rate it a Strong Buy, two say Buy and six say Hold. No one’s selling. I think that’s a pretty good hit rate, and I largely share their confidence, provided the global economy picks up and we don’t get another war or volcano or something.
With a modest P/E of 9.5, I think easyJet still looks good value. Investors might consider buying it today. I’d buy it myself, but I’ve already made my sector pick by purchasing IAG.
This story originally appeared on Motley Fool
