Aircraft belonging to low-cost airline easyJet parked at the EuroAirport, in Basel-Mulhouse-Freiburg, Saint-Louis, eastern France, on September 2 2025 (photo by SEBASTIEN BOZON/AFP via Getty Images).
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Investors in the orange airline ought to feel despondent with the easyJet share price going no where since the turn of the pandemic. Worse still, the stock is down an eye-watering 18.4% this year. Despite that, there’s still healthy upside to be realised.
Turbulent Data
The main culprit behind the easyJet share price’s recent weakness can be attributed to its packaged holiday competitor Jet2 citing later customer bookings for the summer. This has spooked investors for two reasons. The first is that there are fears that travel demand may finally be cooling after years of pent up demand. The second is that later booking cycles reduces visibility for capacity and yields, which can compress profits and margins.
As a result of this, Jet2 mentioned of its intention to cut its winter seat capacity by 3.4% to approximately 5.6 million seats. This hasn’t been helped by the fact that Jet2’s management also mentioned that it now expects its EBIT to come in towards the lower end of the consensus range. This drives home the point regarding the lack of operational visibility, as easyJet investors fear a widespread contagion trend impacting their airline’s bottom line, too.
Making matters worse, the operator also has had to deal with operational disruptions in the form of ATC strikes across some of its key European bases and routes. Industrial action has and is likely to continue weighing on sector expansion plans, scheduling efficiencies, and even costs via fuel burn and delay compensation schemes. In fact, this is expected to take a £15 million toll on easyJet’s FY25 pre-tax profit.
Regardless, the data I’ve collated does paint a rather mixed and noisy travel outlook at the minute. Barclays spending reports have been showing that while packaged holidays continue to perform strongly, flight purchases in both transaction values and volumes are subsiding or even turning negative – and this trend has become even more pronounced over the past couple of months.
Spending Trends Suggest Shoulder Season Lean
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This is also being reflected in airport traffic data as well. Domestic and European aircraft movements at easyJet’s base in Gatwick has been shrinking, with domestic and EU-designated passenger numbers also following closely. And while passenger traffic has continued to grow at other key UK airports like Luton, Bristol, and Edinburgh, their rates of growth have also shrunk to low-to-mid single digits.
Hot Summer Turns Cool?
Despite the trends, there’s still an argument to be made that travellers may just be differing their plans to shoulder seasons and the winter, which would dispel some cooling travel demand fears. After all, domestic and EU traffic in H1’25 (easyJet’s winter/shoulder season half) at key UK airports did realise more material growth in both aircraft movements and passenger numbers.
Additionally, data from other travel-related companies seem to suggest that travel during shoulder seasons is becoming an increasingly popular trend. For example, Airbnb data shows that searches amongst young travellers for autumn stays are up by more than 25%, What’s more, a TRAVELSAVERS and NEST advisors survey shows that one-third of travel agents are reporting an increase in shoulder-season bookings this year.
But perhaps more importantly, I’m still choosing to lend a slightly more upbeat tone about easyJet’s prospects due to the fact that forward sales are still up from last year. According to the board, Q4’25 and Q1’26 forward bookings are about 1.0% better, respectively – at least as of its Q3’25 update. This trend is echoed by peers such as Ryanair and IAG, where forward bookings are either higher or in line with last year.
Be that as it may, perhaps it’s the rate of forward bookings growth that has investors clutching their pearls. Essentially, growth in future bookings have subsided quite substantially over the past couple of years, although I do want to emphasise on two points – the tough Y/Y comps airlines are facing, as well as a lack of material movement away from recent guidance.
Forward Booking Trends Not Out of Ordinary
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Nonetheless, I want to stress that the biggest tailwind in the form of further interest rate cuts is coming. Alongside what I would imagine to be a peaking of inflation going into 2026, this should help to ease the pressures on consumer wallets, and allow for sustainable growth for the industry over the medium term.
Easy Money Not Straightforward
As such, it could be rather straightforward to ascertain that there’s easy money to be made here if, or even when the easyJet share price recovers, especially if earnings continues to expand. I would imagine that a stock can only be undervalued for so long, as earnings growth will always trump share price weakness over the long term.
While the macroeconomic outlook remains mixed for now, retail sales and consumer confidence have held up well. More crucially, the GfK/NIQ consumer confidence barometer’s major purchases sub-index (often a leading indicator for realised consumer spending) has seen healthy improvements over the past few months. And if this metric can hold through the gloomy Budget to come, a good start to FY26 for easyJet could lift its share price.
Even so, the main risk to earnings lies in the labour market. The unemployment rate has been rising substantially over the past year. At the same time, inflation has rebounded, resulting in dissipating positive real wage growth. Hence, if this keeps going, it will likely have a spillover effect on forward sales and ticket yields, as discretionary spending habits take a hit.
Therefore, I’ve adopted a more conservative and have revised my projections for ticket yields downwards, alongside with the company’s load factor and capacity. I now see easyJet’s load factor peaking this year, because with more capacity coming into play over FY26/27, I don’t believe demand growth will be able to keep up with flat-to-negative real wage growth. As such, yields will be compromised, and I have RASK growing negatively through to FY27.
Consequently, my EPS CAGR projection has taken a step down to 7.5% from a previous 11.9% through to FY27 to better reflect the more cautious sentiment. This then beings easyJet’s PEG of 1.1 closer to its 5-year sector average of 1.2. However, it’s worth noting that its EV/EBITDA remains undervalued at 1.3 against its sector’s 5-year average of 2.4. Thus, on the balance of multiples, I have a price target of 590p for the easyJet share price.
Robust EPS Ramp Suggests Upside to Come
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