Ollie Smith: EasyJet’s EZJ share price sorely needed a turnaround, and news of a potential takeover bid by US private credit house Castlelake appears to have delivered it.
The easyJet share price is up nearly 30% over the month on what the airline calls a “highly opportunistic” approach by the alternative investment firm. That said, easyJet’s share price is still down nearly 9% this year. Its longer-term trajectory has not been rewarding either. The potential bid comes as airlines mull cancelling summer flights due to soaring jet fuel costs and uncertain demand. So what’s going on?
Why Have easyJet Shares Been Falling?
Shares in Luton-based easyJet, which operates an all-Airbus fleet of 365 aircraft out of 165 airports, are down nearly 71% from their April 2015 all-time high of £16.12. They’re now around £4.68. Over five years, the period covering a boom in travel across Europe, easyJet’s share price is down 40%. In that time, short-haul rival IAG IAG is up 100% and Ryanair RYAY nearly 70%. So why has the budget airline, which is often described as “struggling”, become vulnerable enough to be the subject of a takeover?
Well, easyJet is a loss-making operation. At its latest results for the first half of its 2026 financial year, losses widened to £552 million – up from £394 million the year before. Rising oil prices are also dampening demand, as they are for other carriers. As a result of the Iran war, passengers are delaying booking decisions to the month of travel, meaning a “later booking curve”—to use airline industry jargon.
Morningstar equity analyst Loredana Muharremi has just reduced the fair value estimate for easyJet stock to £5.74 from £6.70—a 14% cut. Late booking will reduce “earnings visibility”, she says, and may force the airline to cut fares to stimulate demand at a time when rivals are actually upping theirs. She says it is simply not doing enough to fend off this competition.
There is one caveat: The new fair value estimate for easyJet stock doesn’t factor in the potential takeover, she says, which itself highlights the strategic value of the airline’s airport slots, fleet, and holidays business.
Should I Buy easyJet Shares?
So should I buy easyJet shares? Well, at around £4.68, easyJet stock is currently undervalued and trading in four-star territory. But with the Middle East conflict making the travel industry’s prospects more uncertain, let’s just say that buying and owning easyJet shares comes with, well, some baggage.
For Morningstar, I’m Ollie Smith.
