This time last year it would have seemed unthinkable, but easyJet (LSE: EZJ) has just turned in the first annual loss in its history. From a reported pre-tax profit of £430m in 2019, the budget airline slumped to a loss of £1,273m. And yet the easyJet share price has climbed 50% in the past two weeks.
The apparent cognitive dissonance here is all about Covid-19 vaccines. We first had the news of a 90% testing success rate for the Pfizer vaccine. And now we’ve had reported 94.5% success for the Moderna vaccine. So, vaccine here, pandemic over, everyone flying again, and the easyJet share price back on track, right? Well, perhaps not quite, and not yet.
How bad, really, were easyJet’s results? Well, a headline loss figure of £835m looks a little less painful. It is, after all, within the company’s guidance range of £815m to £845m.
Balance sheet in context
The firm spoke of a “robust balance sheet“, and it does look that way. But that’s in the context of companies being hammered by Covid-19 restrictions. The company has raised total liquidity of £3.1bn during the pandemic. But easyJet is now in a net debt position of £1.1bn, compared to just £326m a year previously. I’m being very careful to keep my mind on that when I look at companies telling us their crisis liquidity is fine.
Now, back to the easyJet share price spike. Despite that two-week jump of 50%, the shares are still down around 45% so far in 2020. And before I try to think about whether easyJet might be a good buy now, I’m being very careful to remember one key thing. The share price weakness is not just a result of the 2020 pandemic.
Long-term easyJet share price slow progress
No, even before we became aware of the devastating virus, easyJet was lagging some way behind the FTSE 100. In the five years to December 2019, the easyJet share price moved nowhere while the index gained 11%. Actually, easyJet was flat overall, but very volatile along the journey. Volatility can be good for investors looking to buy in the dips, but it’s not ideal for those of a nervous disposition.
Dividends provided yields from around 3.5% to 5.3% or so, but FTSE 100 dividends as a whole have been going through a good spell. My point is that easyJet wasn’t a high-flying, super-profitable, investment that was suddenly laid low by the pandemic.
Time to buy now?
What of the future? I reckon those who think the skies will soon be filled with hordes in little orange planes heading off in search of sun and sand are, well, maybe a little premature. We’ll surely be waiting a good few months, at least, before we see any serious mass vaccination progress. Some even reckon we’ll be wearing masks for as much as another year yet.
I’m building a buy list at the moment, but the easyJet share price doesn’t tempt me to include it. If I wouldn’t buy an airline in good times, I’m not going to buy one now.