Jet2 share price has hit turbulence: is it a bargain now?
The Jet2 share price hit turbulence this week, tumbling to a low of 1,210p, its lowest level since April this year. Its lowest level this week was down by over 38% from the year-to-date high. This article explores why the Jet2 stock price has crashed and whether it will rebound.
Why Jet2 share price plunged
Jet2 is a major low-cost carrier and tour operator with 135 aircraft and serving thousands of customers. It has grown to become the third-biggest airline in the UK and the biggest tour operator in the country.
Jet2 share price has plunged in the past few days after the company published its annual report, which sent shockwaves in the industry.
While its business did well in the last financial year, its forward guidance was weaker than expected. Its revenue rose by 15% to £7.17 billion, while its operating profit rose by 4% to £448 million.
Jt2 generated an annual profit before taxation of $593 million, higher than the £529 million it made in the last financial year. Inflation in the UK had a 5% impact in it operating expense.
The company benefited from higher leisure demand in the country. Seat capacity rose by 13% in the last financial year to 22.30 million, while flown passengers rose by 12% to 19.7 million.
The main reason why the Jet2 share price plunged is that the company tempered its profit outlook. It also reduced its seat capacity by about 200,000 for the year as it observed that customers were booking flights closer to their departure.
Jet2 now expects that its annual profit this year will be near the lower side of the £449 million and £496 million.
The main concerns facing customers are geopolitical, extreme weather, and the macro environment. Recent data showed that the UK inflation has moved to 3.6%, the highest level in months, forcing many Britons to save and reduce their discretionary spending.
Jet2 is also operating in a highly competitive market with its rivals like Ryanair, EasyJet, TUI, and Wizz Air competing for market share in the country.
On the positive side, Jet2 has always been conservative when offerings its guidance. It has also become significantly cheap, with its market capitalization of £2 billion giving it a price-to-earnings ratio of 7.7, lower than Tui’s 8.5 and EasyJet’s 9.
Jet2 share price technical analysis
Jet 2 stock | Source: TradingView
The daily chart shows that the JET2 stock price peaked at 1,963p on June 11. It then plunged and moved to a low of 1,210p this week. This was the lowest point since April last year.
Jet2 stock then bounced back and was trading at 1,450p on Friday as investors bought the dip. It is attempting to fill the gap created on Thursday.
The stock is also approaching the Major S/R pivot point of the Murrey Math Line at 1,500p. Therefore, the stock will likely remain under pressure for a while as the ongoing rebound could be a dead-cat bounce. As such, it may retest the strong, pivot, reverse at 1,250p.
In the long-term, however, the Jet2 share price will likely rebound and retest the strong pivot reverse point at 1,750p.
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