US Edition easyJet
335.6p +11.1
Questor says BUY
At the time, Questor said that there was risk involved in the investment because of rising oil prices – but the long-term prospects were sound.
The shares have slid by 14pc since then, so the buy recommendation may have been a little early, but the situation remains the same today – the shares are a risky play with short-term volatility likely, but over the long term the shares offer good value.
Indeed, the average price target of the 21 analysts monitored by Bloomberg is 463.6p, some 44pc above the current share price.
The main headwind is the high oil price, which has been soaring since the troubles emerged in North Africa and the Middle East. This means that rises in air fares are inevitable. But there are strategic problems to be sorted by the board too.
In a recent interview Carolyn McCall, easyJet's new chief executive, said that she wanted to increase their airline's share of the business market by increasing the number of flights on routes to and from London, Geneva and Paris and it will also roll out flexible tickets, which are more attractive to business travellers.
"We do leisure and we do it really well," Ms McCall said. "The business traveller proposition is another kind of product. It's quite a different thing. For the first time ever, easyJet has two product propositions." However, some analysts are sceptical as to how much of the business market a low-cost carrier will be able to attract.
Despite the well-documented protest in the region, the company also recently launched the first low-cost carrier service to Amman in Jordan.
The shares are trading on a September 2011 earnings multiple of 9.2, falling to 7.7 next year. The shares are also yielding a prospective 2pc.
The shares were first recommended on January 23 at 382p and they remain a risky buy.