The EasyJet takeover by Apollo is reshaping the story around UK aviation and the capital markets that sit behind it. A £5.7b bid that removes a familiar airline from the FTSE 250 is more than a headline. It changes where attention and money might flow next. This article looks at three UK stocks most exposed to this news, one potentially helped and two that may feel the strain.
Jet2 (AIM:JET2)
Jet2 is a UK leisure travel group that runs an airline and a range of holiday brands, selling package trips and flights to Mediterranean, Canary Islands and European city destinations. Virtually all of its £7.5b revenue comes from leisure travel, with customers paying for flights, hotels and extras such as baggage and seat selection. The company sits in mid cap territory with a market value of about £3.0b.
Jet2 is firmly in the spotlight after EasyJet’s agreed takeover because it offers one of the clearest remaining UK-listed ways to get exposure to low cost leisure travel. The business mixes package holidays, a large branded flight operation and a 139-strong fleet with what management calls a strong cash position and an active buyback program, which together point to a focus on shareholder returns. At the same time, you are dealing with a capital intensive airline that relies heavily on external funding and is exposed to UK consumer health and fuel costs. For investors weighing whether Jet2 could pick up attention and money as EasyJet exits the market, the balance of those strengths and risks matters more than ever.
Jet2 sits at the crossroads of shrinking UK-listed leisure capacity and a £7.5b revenue engine that investors may not have fully priced in yet. Get the fuller picture of its cash, fleet and holiday model in the analysis report for Jet2
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iShares - iShares FTSE 250 UCITS ETF (LSE:MIDD)
iShares FTSE 250 UCITS ETF is a fund managed by BlackRock that aims to track the FTSE 250 Index, giving you broad exposure to UK mid cap stocks across many sectors in a single trade. It does this by buying a representative sample of the shares in the index rather than every single stock. The ETF has a market value of about £665 million.
iShares FTSE 250 UCITS ETF sits right in the firing line of the EasyJet deal because the fund must track the FTSE 250 closely. With EasyJet set to be taken private and removed from the index, the ETF will be forced to sell its holding and recycle that cash into other mid caps whether or not the timing is attractive. That comes on top of a patchy picture, including unprofitable returns on equity and a record that has lagged the wider UK market, all while investors have little hard data on valuation or future growth to lean on. Anyone using MIDD as a simple UK mid cap proxy needs to think carefully about how much risk they are really outsourcing to the index rules here.
iShares FTSE 250 UCITS ETF looks like a simple mid cap shortcut, yet forced index tracking and EasyJet’s removal could be masking where your real exposure now sits. Read the analysis report for iShares - iShares FTSE 250 UCITS ETF
London Stock Exchange Group (LSE:LSEG)
London Stock Exchange Group is a global markets and data business that runs trading venues such as the London Stock Exchange and provides indexes, analytics and risk tools used by banks, asset managers and corporates. Most of its revenue comes from data and analytics, with about £4.4b from core data products, £986m from FTSE Russell indexes, £602m from Risk Intelligence and £3.7b from Markets, plus a small £8m from other activities. The company has a market value of roughly £42.6b.
Investors looking at London Stock Exchange Group after EasyJet’s move to go private need to weigh a powerful data and AI story against pressure on London listings. The stock sits on a rich valuation while relying on very high debt and external funding. The loss of another major UK listing underlines the risk that its domestic equities franchise slowly erodes even as it promotes projects such as LSE 24 and digital securities. At the same time earnings growth, rising margins and a larger dividend and buyback give the impression of strength that could tempt investors to overlook how much needs to go right to justify current expectations.
London Stock Exchange Group’s rich valuation and high debt can easily mask where the real pressure sits on its core business. Read the 3 key rewards and 1 important warning sign
Seeking Alternatives Beyond EasyJet?
Fresh ideas move first. By the time every chart shows a breakout or a stock is flying on momentum, the easy entry can be gone. Scan these under the radar for now picks and act now.
- Spot potential turnarounds before momentum screens catch them by running the 10 high quality undiscovered gems and focusing on businesses with solid fundamentals already in place.
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- Position for structural shifts in energy and infrastructure with the 89 nuclear energy infrastructure stocks and keep an eye on stocks that could benefit if sentiment swings toward nuclear power.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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