Despite the rise in stocks following US NFP data last week (the FTSE 100 Closed higher Friday), it seems to us that the initial rise will fade as we don’t believe the Fed will deviate from its current path following the jobs report.
As a result, we still see near-term pressure on shares of EasyJet, Currys, and Carnival…some more than others.
- Long-term, we are bullish on EasyJet and airlines as a whole.
- However, it’s quite an uncertain time for carriers, with demand surging this year, we are now approaching a period where we might see a slowdown, while at the same time, inflation is soaring, and the economic environment continues to worsen.
- While we are confident about the long-term prospects of EasyJet and some other airline stocks, significant headwinds could weigh on EasyJet shares further in the near term.
- Looking at our coverage list, we were surprised to see that the Currys share price had gained 6.4% in the last week.
- The retailer’s demand is declining as inflation dampens consumer spending, and visits to its website, while back at pre-pandemic levels, look as though they will fall in the near term, with consumers on Twitter talking about reducing spending on the rise.
- Given the reasons mentioned above, we see last week’s rise being faded this week.
Carnival Corp (CCL)
- Carnival Corp shares are up more than 7% in the last month, although they are still trading around their pandemic lows.
- While overall, cruise demand is strong — Google searches for cruises are back at pre-pandemic level — the company has a significant amount of debt.
- As a result, a substantial hit to demand resulting from the current economic downturn could continue to pressure Carnival shares.
- While we have no significant view on Carnival, we lean slightly bearish.