Shares in finances airline easyJet (LSE: EZJ) have skilled a dramatic fall not too long ago. Since mid-February, the EZJ share worth has fallen from above 700p to round 360p – a decline of almost 50%.

Right here, I’m going to debate whether or not this share worth fall has introduced a gorgeous shopping for alternative. Is now the time to purchase easyJet shares for my portfolio?

Ought to I snap up easyJet shares in the present day?

Let’s begin with some causes to be optimistic right here.

One clear optimistic is that demand for flights stays excessive, because of the ‘revenge journey’ development – the place individuals are attempting to make up for the journeys they missed out on throughout Covid.

That is illustrated by easyJet’s near-term bookings. In a current enterprise replace, the corporate mentioned that demand for journey this summer season stays “sturdy”, with 86% of tickets offered for Q3 2022 and 48% offered for This autumn. The latter determine is broadly according to reserving ranges on the identical level in FY2019.

One other optimistic is that easyJet is forecast to return to revenue subsequent monetary yr (ending 30 September 2023). At present, analysts count on the group to generate a web revenue of £290m and earnings per share (EPS) of 38.5p. That EPS forecast places the inventory on a reasonably undemanding forward-looking P/E ratio of about 10.

Dangers that would hit the share worth

Shifting on to the dangers, nonetheless, there are a selection of issues that concern me right here.

My major challenge is in relation to the operational issues that European airways are experiencing proper now. For the time being, easyJet and its rivals are in a state of chaos, with lots of of flights being cancelled each week.

One of many key issues is employees shortages throughout the trade. Throughout Covid, lots of people in airline jobs left the trade. Some went to work for corporations that weren’t impacted negatively by the pandemic (like Amazon) whereas others turned to the gig economic system. Heaps retired. Now the employees are gradual to return. Brexit is compounding the issue. I don’t count on this challenge to resolve itself in a single day. And I’m not the one one who thinks that. Analysts at JP Morgan consider these issues might final 12 to 18 months. Clearly, that is going to have a major affect on revenues and income.

It’s price noting that analysts are presently slashing their earnings estimates for easyJet. Over the past month, for instance, the consensus EPS forecast for this yr has fallen by 12.7p to -1.7p. In the meantime, they’re additionally slashing their share worth targets. On 1 July, as an illustration, Citigroup reduce its worth goal to 360p from 475p. That means no share worth upside from present ranges.

Rising prices are one other challenge I’m involved about. Not solely does easyJet probably face increased gas prices however it additionally faces increased wage prices and airport prices. These increased prices might hit income and the share worth.

Lastly, the cost-of-living disaster is one other main danger right here. Proper now, shoppers have cash to journey as a result of they saved throughout Covid. And so they’re ready to pay increased ticket costs. This might change subsequent yr as financial savings run out.

easyJet shares: my transfer now

Given these dangers, I feel the very best transfer is to go away easyJet shares on my watchlist for now. All issues thought-about, I feel there are safer shares to purchase.