If I’d invested £1,000 in easyJet shares 2 years ago, here’s how much I’d have now!

The past two years have been a tough time for investors easyJet (LSE: EZJ) shares. The crippling effect of the pandemic on the airline industry is putting downward pressure FTSE 250 airline stocks.

The introduction of quarantines, testing requirements and travel bans immediately hurt the sector as consumer demand for international travel disappeared without notice. A meaningful recovery has so far been slow, despite severe restrictions.

Fortunately, I didn’t buy the company’s shares, but if I had been here I would have been in my current position.

A two-year nosedive

Two years ago, easyJet could be sold for 687 p. For context, it is important that in January 2021 the share price has almost halved its value compared to the pre-pandemic level.

Today, shares changed hands for 431p. That’s a 37% reduction in 24 months.

In 2021, a lump sum investment of £1,000 will earn you 145 shares, leaving £3.85 in spare change. Today, my position will shrink to £624.95.

What’s more, the company paid dividends in 2020 and has not rewarded shareholders since then. Before the spread of Covid-19, the low-cost carrier had already built a reputation as a reliable dividend stock.

This is an important lesson about the potential pitfalls of passive income investing – namely, that there are few certainties in the stock market, only risk and reward.

In short, I would be sitting on a big loss if I had invested in easyJet shares two years ago without a shareholder distribution to soften the blow.

A brighter outlook?

Despite the recent problems, easyJet’s financial results show positive momentum. The most impressive figure is the record EBITDAR headline of £674m in Q4 2022. The company also made a profit of £82m for the quarter.

Encouragingly, the airline’s debt level is lower than its main competitors, except Ryanair. A strong balance sheet is the company’s main advantage over its competitors. Indeed, this is a contributing factor in analysts’ expectations that the dividend may return as soon as this year.

In addition, takeover rumors are rife. Last year, the CEO of the owner of British Airways IAGLuis Gallego, hinted that FTSE 100 the company is looking at easyJet as an acquisition target. This news comes on top of that report WizzAir approached easyJet about a potential merger in 2022.

Any of these developments could have a positive impact on stock prices. However, I am cautious that possible M&A activity is still quite speculative at this stage.

There are also ongoing risks. In line with industry competitors, the company must continue to contend with turbulence in the commodity market. Although there are signs of jet fuel prices coming down from last year’s peak, I think this issue will remain a challenge for the airlines in 2023.

Should I buy shares?

Despite some headwinds still for growth, I think the next two years will likely be better for easyJet shares than the last two have been.

At the current share price, the stock looks like a value investment opportunity to me. If I had the money, I would invest in easyJet today.