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easyJet (LSE: EZJ) shares have had a torrid decade but now, investors can’t get enough of them. The FTSE 250-listed budget carrier has shot up the popularity charts, ranking as the third best-selling UK stock over the last week, according to AJ Bell. Only BP and Shell sparked more excitement. The energy giants are clear beneficiaries of the war in Iran, whereas easyJet is more likely to take a big hit. What’s going on?
A decade of share price pain
easyJet has struggled for years. Back in April 2016, the shares traded at 1,250p. This morning, before the market opened, they sat at 356p. Incredibly, they’re down more than 70% over the decade.
The pandemic grounded the industry and left airlines scrambling to survive. The Russian invasion of Ukraine drove up fuel costs and the subsequent cost-of-living crisis hit Europe hard, threatening demand. Throw in operational disruption, strikes, squeezed margins, and intense competition and the shares remained firmly grounded.
Yet it’s hardly a basket case. Full-year 2025 headline pre-tax profits to 30 September rose 9% to £665m, driven by high demand and the profitable growth of its holiday division. Net cash jumped from £421m to £602m, a near 43% increase. Rival FTSE 100 carrier International Consolidated Airlines Group (IAG), which owns British Airways, has been in demand despite facing many of the same pressures. easyJet looks a little picked on.
On 29 January, the board maintained full-year guidance after a strong first-quarter and said summer bookings were building well. On 11 February, Citi upgraded the stock to buy, with a 600p target price. It pointed to stabilising costs and the prospect of improving margins from 2026, helped by fleet upgrades.
Then came the Iran conflict, with the threat of higher oil prices, jet fuel shortages, and flight cancellations. IAG has taking a beating too. But last week something changed and easyJet buyers came out in force.
Valuation and risks
There’s one obvious attraction. After such a dismal run, the shares look cheap, trading on a price-to-earnings (P/E) ratio of 5.4. Then again, they’ve looked cheap for some time, so value alone doesn’t explain the sudden surge in interest. The dividend yield has climbed to 3.7%, which is decent but not enough to drive buying on its own.
It’s also worth noting that the FTSE 100 as a whole recovered strongly in the run-up to Easter, despite global tensions. Some investors may feel the sell-off went too far and are looking for recovery plays. Given that low valuation, easyJet is a big one, potentially. Seventeen analyst forecasts produce a median one-year share target of 512p. If achieved, that would represent a mighty 43% gain from current levels. Of course, forecasts are never guaranteed, and many will have been written before the latest volatility.
Investors look prescient today. The easyJet share price has jumped 13% in early trading, as markets bounce back on news of the two-week ceasefire in Iran. I think braver investors might consider buying the budget airline as an exciting long-term recovery story. They shouldn’t expect a smooth ride, though.
This story originally appeared on Motley Fool
