EasyJet takes off despite loss, and Just Eat hit by curse of Amazon

Friday, May 17, 2019 - 09:52

“Boris Johnson’s pitch for the Tory leadership isn’t going down too well with markets as sterling falls amid fears the news implied increased risk of a no deal Brexit,” says AJ Bell Investment Director Russ Mould.

“This helps insulate the FTSE 100 from larger falls in European markets. The subdued sentiment influenced by a weak showing for Chinese stocks overnight as trade worries persist."

EasyJet

“Budget airline EasyJet becomes the latest travel stock to post a big loss as it reports first half results, but its shares are taking off regardless.

“This is reward for the tight control of costs which means despite lower revenue, full year profit guidance is unchanged.

“These results were always likely to compare unfavourably with last year’s which benefited from scheduling problems at main rival Ryanair and the collapse of Monarch Airlines.

“And while the market is never a fan of excuse-making, Brexit is undoubtedly a big headache for the entire industry – so it is hard to argue with the company blaming a cloudier outlook on the uncertainty over exactly when and how the UK will exit the EU.

“It is a tough time to be an airline in general with rising labour costs, excess capacity and spiralling fuel costs, not to mention the growing pressure on the whole concept of flying from environmental campaigners.

“Against this stormy backdrop, EasyJet perhaps has a clearer flight path than some of its peer group.”

Just Eat

“The curse of Amazon strikes again. The online giant is now so dominant the mere mention of its entry into a new industry can leave incumbent companies and their shareholders quaking with fear.

“That’s what happened to Just Eat this morning after Amazon revealed a substantial investment in rival delivery service Deliveroo’s latest funding round.

“Amazon had its own ill-fated attempt to break into this market – Amazon Restaurants UK – which started in 2016 but closed two years later. It looks like instead it will try to compete by buying into an established operator in the space.

“Given its financial firepower it is little wonder that Amazon effectively parking its tanks on Just Eat’s lawn is spooking investors.

“The marketplace was already getting increasingly competitive with Uber Eats another firm chasing consumers appetite for takeaway food.

“It is worth remembering that Just Eat remains the market leader in the UK, however this development ramps up the pressure on management as they reshape the business to increasingly offer delivery services alongside an online takeaway platform.

“Pressure on Just Eat’s share price could leave the company vulnerable to being swallowed up by a larger peer.”

These articles are for information purposes only and are not a personal recommendation or advice.


The daily market comment is written by Russ Mould, AJ Bell’s Investment Director and his team. The article highlights the movement in the main index, winners and losers on the day and any macro-economic announcements.