The EasyJet share price has bounced back in the past few days. The EZJ stock has risen to 720p, which is about 30% above this month’s low of 550p.
EasyJet has made headlines recently. The most significant was that the company turned down an offer from Wizz Air, a rival company. The management said that the company’s offer significantly undervalued its business. The other significant event was a near $2 billion capital raising from the company.
It raised the funds by diluting existing shareholders in a bid to boost its balance sheet. The firm also intends to use the new hoard of cash to expand its business. The new rights issue made the company’s founder, Sir Stelios Haji to lose his majority stake.
Another notable event in the industry is that British Airways pilots voted against an idea to start a budget airline that would compete with EasyJet and other rivals like Ryanair and Tui.
At the same time, there is a likelihood that EasyJet will receive a sweetened offer soon. That’s because many analysts believe that the European aviation industry is ripe for consolidation. As such, a company like Wizz could sweeten its offer or a rival company like Ryanair come with a bigger offer. Besides, Stelios has sounded open to the idea of selling the company. In a note, an analyst at Bernstein said:
“EasyJet’s network and customer reach combined with Wizz’s low-cost management style would be a winning combination. It would definitely be a major shake-up of the European space.”
EasyJet share price forecast
A look at the daily chart shows that something important happened. The EasyJet share price declined to a low of 555p after the company announced the new rights issue. This level was slightly below the 61.8% Fibonacci retracement level.
Since then, the stock has risen and is now slightly below the 38.2% retracement level. The stock managed to move above the descending trendline. Therefore, the stock will likely continue holding steady as investors target the next key resistance at 800p.