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By Malcolm Stacey | Thursday 26 April 2018
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Hello, Share Snackers. As you may have gathered, I constantly stress the importance of the currently steaming price of Brent crude. This happy trend will affect not just the oilers, but many other shares out there.
Not all the effects will be beneficial, though most of them are. For example, airlines will see profits under attack if the value of fuel keeps rising. EasyJet (EZJ) and Ryanair (RYA) may be ok, especially as airline travel rises with a surge of tourism, a lot of it from developing countries. But Flybe (FLYB), described as Britain biggest regional airline, is not a company which fills me with confidence.
Even if it had a takeover bid from the Stobart Group (STOB) the other day. The two firms couldn’t come to an agreement on price. Flybe, which started flogging shares eight years ago, once enjoyed a 300p price tag. But currently, the share languishes at around 40p. Analysts reckon that the full-year results for the last financial year will show a £20 million loss.
The management is naturally not seeking to expand, but instead wants to cut capacity and focus on more profitable routes. As I’ve often remarked, aeroplane companies are at the mercy of economic forces and even natural ones, like erupting volcanoes and the weather. It’s not just the high price of oil that threatens on the economic front, but the inability of passengers to pay for trips abroad.
Another headwind (sic) is the weak pound, which also hits fuel prices. And sterling probably won’t fully recover until Brexit is finally underway - and perhaps not even then. Yes, a new Stobart offer could allow the share price to take off, but the City reckons that another take-over proposal might not surface for some time.
But you can wait, if you want to, in the Punter’s Return.
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