It’s understandable that shares in airline easyJet (LSE: EZJ) have been among the hardest hit by fears relating to the coronavirus. Obviously fewer people will fly if they think it means they will catch a deadly virus – or if flights are cancelled.
Any further bad news is likely to keep pushing the shares down, but any recovery in the market and easing of fears around coronavirus would have the opposite effect. EasyJet’s shares could take off in such a case.
The business itself
EasyJet itself isn’t performing badly. Excluding coronavirus, it has a number of positives. One is its 4% dividend yield.
A second is that easyJet has a strong brand, which may explain why it is consistently able to push up passenger numbers. Between 2008 and 2017, its passenger numbers almost doubled to over 81m. The brand is strongly associated with value, meaning cheaper flights, which is a good part of the market to be in at the moment given economic worries.
As one of the stronger operators in a very competitive industry, easyJet tends to benefit from the collapse of weaker rivals. Collapses such as that of Monarch in recent years have allowed it to pick up more airport landing slots and more passengers.
the company faces a number of longer-term challenges that are beyond its control – for example, the price of oil, increasingly erratic weather, and strikes. But the business itself is well run. Now could be a good time to pick up the shares at a cheaper price. Especially if you think coronavirus won’t hit the economy as hard as has been feared.
A high yielder
Aviva (LSE: AV) shares are about 13% cheaper than they were just a month ago, despite not having issued any negative news. This can only be explained by the wider market collapse which has dragged down nearly all share prices on the market.
With a lower share price comes a higher dividend yield. Aviva’s shares now provide investors with a yield of nearly 9%.
The company has squeezed out operating profit growth of 1%, driven by strong results in its general insurance business. Digitalisation and a slimming down of the group – a key priority of management – give further opportunities for the insurer to improve profitability. Also helping is a focus on cutting debt. Debt eats up profits so reining this in is a good move for investors.
The business faces challenges, especially around growth, which is perhaps not surprising given how large it is. Given the size of the recent fall in the share price, there’s little reason to think the shares won’t jump back up when the market recovers.
My belief is that when the markets do recover from the recent heavy fall, then these two companies are front of the pack to see their battered share prices quickly rise again.