- Summary:
- We explain why the EasyJet share price will likely decline in August as the aviation sector continues to strugglw because of the new Covid wave
The EasyJet share price has retreated in the past few weeks as worries of the Delta variant remains. The EZJ shares are trading at 827p, which is about 25% below the highest level this year. The company has a market capitalization of more than 3.7 billion pounds.
EasyJet and Delta variant
The biggest concern for EasyJet and other European airlines is the rising number of Covid cases in key markets like the UK, Spain, and Italy. Investors worry that the current strong demand for flights will slow down as more people opt to remain at home. Another key concern is that the number of cases among the vaccinated has been on an upward trend.
On a positive note, the industry is seeing more demand as evidenced by the recent better results by the likes of IAG, Ryanair, and Wizz Air. In its results last week, IAG narrowed its quarterly loss to under 1 billion pounds.
In July, EasyJet released relatively strong results. The firm said that its cash burn declined to just 55 million pounds. At the same time, its fixed costs and capital expenditure reduced to about 34 million pounds. It also expects that its capacity in the current quarter will be about 60% of 2019 levels. Its revenue came in at more than 212 million pounds, helped by more than 151 million passenger revenue.
EasyJet is still a good company with a growing market share. However, like all airlines, it is seeing higher costs with oil prices substantially higher than where they were last year. Also, there is an ongoing shortage of pilots and other workers.
EasyJet share price forecast
The daily chart shows that the EZJ share price rose to a high of 1,090p this month. This price was slightly below the 61.8% Fibonacci retracement level. It then pulled back to the current 827p. At the same time, it has formed what looks like a rounded top pattern. It has also moved below the 25-day and 50-day moving averages.
Therefore, the path of least resistance for the stock is lower. This will likely see it drop to the next key support at 700p in August. This view will be invalidated if the price moves above 1,000p.
