easyJet (LSE:EZJ) Draws Hedge Fund Interest, Does The Stock Look Fairly Valued?

easyJet (LSE:EZJ) is back in focus after several hedge funds, including Davidson Kempner, Millennium International Management and Farallon Capital Management, disclosed new positions in the airline through cash-settled derivatives.

At a latest share price of £6.774, easyJet has seen a 1-month share price return of 1.53% and a year-to-date share price return of 31.84%, while the 1-year total shareholder return of 50.01% and 3-year total shareholder return of 83.57% point to strong momentum building over a longer horizon as hedge fund interest via derivatives adds another catalyst to sentiment around the stock.

Surface other potential travel rebound candidates by scanning our hand picked 5 high quality undiscovered gems, which, like easyJet, are drawing fresh institutional attention through shifting ownership and derivatives activity.

easyJet has already delivered hefty gains over the past year, yet hedge funds are only now ramping up exposure through derivatives. Is most of the upside already in the rear view mirror, or is valuation still on your side?

Most Popular Narrative: 2.5% Undervalued

On the most followed view of easyJet, a fair value of £6.95 sits slightly above the latest £6.77 close, which keeps valuation claims finely balanced and puts real weight on the business drivers behind that gap.

Yet short-haul, leisure-focussed air travel in Europe has seen a few decent years ever since the start of consumers’ revenge buying in the aftermath of the pandemic. For a sector accustomed to razor-thin margins and constant battles for market share, those were particularly good months.

See why 39 investors see easyJet as 3% undervalued.

Result: Fair Value of £6.95 (UNDERVALUED)

Still, easyJet’s story can break if leisure demand cools or if a higher Apollo offer fails to appear and deal enthusiasm drains away.

Find out about the key risks to this easyJet narrative.

Another View: easyJet On Traditional Earnings Metrics

A different lens paints easyJet in a less generous light. On a P/E of 12.2x, the stock is priced above both the global airlines group on 11.6x and close peers on 10.9x, even though the fair ratio sits much higher at 17x.

For you as a shareholder, that mix of slightly richer pricing versus the sector but a discount to the fair ratio suggests a trade off between paying up for recent momentum and backing the idea that the market could move closer to that higher reference point over time. Which side of that trade off feels more realistic to you?

See what the numbers say about this price — find out in our valuation breakdown.

Next Steps

Sentiment around easyJet has clearly turned more optimistic, so this is a moment to move fast and test the story against your own thresholds. To see what that optimism is built on, take a closer look at the company’s 3 key rewards

Looking for more investment ideas beyond easyJet?

Once you have formed a view on easyJet, do not stop there. Broaden your opportunity set by testing fresh ideas through focused screeners built around clear fundamentals.

This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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