easyJet (LSE: EZJ) is a favourite among many consumers as a low-budget airline that’s based in Europe. In the past, its popularity has seen the easyJet share price soar, reaching highs of over 1,900p in 2015. It has also sported a very healthy dividend yield. However, everything turned around a couple of years ago, with the emergence of Covid-19. This saw demand for airlines grind to a halt, forcing easyJet to raise extra cash through both debt and equity to say afloat. With this in mind, what would a £1,000 investment in easyJet five years ago be worth now?
The figures
Five years ago, the easyJet share price was around 1,044p. With £1,000, I would have been able to buy around 96 shares. Since this date, the share price has declined by nearly 40%. Therefore, my investment would only be worth £606 today, a fairly poor return, and far worse than the FTSE 100 return of nearly 5% in the same period.
Nonetheless, although dividends are no longer being paid due to the pandemic, easyJet used to offer large shareholder returns. Between 2017 and 2020, the firm paid dividends worth 197.2p per share. With 96 shares, this would equate to shareholder returns of £189.30. Therefore, a £1,000 return five years ago would total around £795 today, a loss of £205.
The future for easyJet shares
Due to the effects of the pandemic, the past five years have clearly been very negative for the airline, despite the fact that it has outperformed some others in the industry. Such a severe drop in the share price therefore seems justified. In fact, the company’s FY21 earnings were a loss before tax of over £1.1bn. But things are starting to look slightly more positive.
In fact, bookings for the second half of this financial year are ahead of pre-pandemic levels. And in the fourth quarter of this year, the firm expects that demand will return to near pre-pandemic levels. A full recovery is expected by 2023. If these forecasts are correct, I feel that this could result in significant long-term upside potential for the easyJet share price. But there is a big ‘if’, especially as the pandemic continues to cause such high levels of uncertainty.
Despite this uncertainty, easyJet looks financially strong, having £4.4bn of liquidity. Hopefully, this will allow it to capture more opportunities. In fact, it has already obtained additional slots in Lisbon, Porto, and Gatwick. This is ahead the expected surge in demand later this year. After a couple of years of disruption, I’m also confident that demand for holidays will be strong later this year, and low-budget airlines will be a prime beneficiary.
As such, although issues such as inflation, high oil prices and coronavirus will certainly not make it easy, I feel that easyJet may finally be able to launch its recovery in 2022. The next five years seem more promising than the past five. This tempts me to buy easyJet shares.
Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
