Why I’m not buying easyJet shares… yet

easyJet (LSE: EZJ) shares look cheap on almost every typical measure right now compared to the broader FTSE 100.

For a profitable, well-known airline with one of the strongest brands in European budget travel, this sounds like it could be a bargain. So, what’s holding me back from buying the shares today?

A cheap stock for a reason?

As I write on Monday morning (15 June), the shares are down about 7.5% over the past year and sitting at 509.4p. That’s despite the underlying business showing solid profitability in recent years.

A price-to-earnings (P/E) ratio of 9.8 and a 2.6% dividend yield from a business carrying more than 90m passengers a year looks like a value opportunity.

If you’re considering easyJet shares, it’s also important to compare the stock to peers like Jet2. Here’s a quick comparison between the two budget airlines:

But is there more to easyJet than meets the eye?

The clouds gathering over the sector

The company is a low-cost operator with over 350 aircraft operating in nearly 40 countries. It’s a powerhouse of short-haul travel but I think that’s where some of my hesitancy lies. 

The big thing on my mind right now is jet fuel. I’m thinking about both the cost and availability of this critical input for airlines. The ongoing Middle East conflict has driven crude and refined fuel prices sharply higher, and airlines are feeling it. easyJet chief executive Kenton Jarvis downplayed the potential impacts in the company’s half-year 2026 results.

We have seen no issues at the 165 airports we fly in and out of. We stay in constant contact with airports, governments and fuel suppliers, and what they tell us is that fuel supply is being diversified. That is why confidence is lifting that this summer we will be uninterrupted in our flying programme.

Lufthansa recently flagged nearly €1.7bn (£1.5bn) in additional fuel costs, while Ryanair’s chief executive warned that European carriers could fail if jet fuel prices don’t ease. Fuel is one of an airline’s largest costs, and a sustained spike flows straight to the bottom line. The new peace deal could be good news both on this level as well as a humanitarian one.

Then there’s the demand side. Consumer confidence in the UK remains fragile, and a meaningful economic downturn could hit discretionary spending hard. That includes holiday spending if consumers need to tighten the purse strings.

That said, it can’t be all doom and gloom. Is there anything on the other side of the equation to balance this out?

Reasons for cautious optimism

There are certainly some green shoots to consider if you’re evaluating the stock right now.

easyJet’s holidays division has been a standout performer, growing rapidly and diversifying earnings away from pure seat sales toward higher-margin package holidays.

The business also has a powerful competitive position as a result of its scale, brand recognition and cost discipline. This could help it to absorb fuel shocks better than weaker rivals and capture more market share.

If fuel prices ease and the UK economy avoids a sharp downturn, today’s valuation could look like a genuine bargain in hindsight.

My verdict

Despite plenty of potential positives, I’m not looking to add more cyclical exposure to my portfolio.

However, a durable resolution in the Middle East could be the catalyst to review not just easyJet but several other stocks on my radar.

Should you invest £5,000 in easyJet Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if easyJet Plc made the list?

Ken Hall does not hold any positions in the companies mentioned.