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Forget easyJet shares. Here’s where I’m investing right now

Edward Sheldon, CFA
·3-min read
Coronavirus written newspaper close up shot to the text.
Coronavirus written newspaper close up shot to the text.

The easyJet (LSE: EZY) share price is getting a lot of attention from UK investors right now. It’s down 60%+ year to date, and many investors are looking at the stock as a rebound play.

Personally, I’m not tempted. Here, I’ll discuss why I’m avoiding the stock. I’ll also explain where I’m investing my money at the moment.

easyJet shares: a high-risk investment

In my view, easyJet shares are a high-risk investment because the outlook is so uncertain due to Covid-19.

In October, the airline warned that the aviation industry continues to face “the most severe threat in its history” and said it may need government support. The company also advised it could report a loss of as much as £845m for the year ended 30 September.

Meanwhile, on Friday, easyJet said the recently announced lockdowns across Europe had forced it to scale back its already reduced flying schedule. After stating in October that it was expecting to fly at around 25% capacity this quarter, it now believes it will fly at no more than 20% of capacity for the rest of the year. The constantly changing lockdown/quarantine rules, which I warned about here, are clearly a nightmare for easyJet.

It’s worth pointing out that City analysts continue to downgrade their earnings forecasts for easyJet. When I covered the stock in late September, analysts were expecting earnings of -144p for the financial year just passed. Today, the consensus forecast stands at -171p. Substantial earnings downgrades like this tend to put negative pressure on a company’s share price.

All things considered, I just don’t think easyJet shares are worth the risk right now. In my view, there are much better stocks to buy.

Here’s where I’m investing

Personally, I’ve been investing predominantly in the technology sector recently. This sector is more insulated from Covid-19. And many companies within have substantial long-term growth potential.

One UK technology stock I’ve bought for my portfolio recently is Gamma Communications. It’s a leading provider of communications services for businesses. I think it’s well-placed to profit from the work-from-home trend. This year, revenue is forecast to climb about 17%. Not bad in the midst of a global pandemic.

I’ve also been buying shares in tech giant Microsoft recently. MSFT has dominant positions in a number of industries including business software, cloud computing and video gaming. I believe it’s well-placed to grow in today’s digital world.

Finally, I’ve also been snapping up shares in freelance employment platform operator Upwork because I’m bullish on the gig economy. This has been a great investment for me, so far. Last week, the stock jumped 40%+ in one day after the company published better-than-expected Q3 results. I think there’s plenty more growth to come from this under-the-radar tech stock in the long run.

These are the kinds of investments I’m making right now. Shares like easyJet, which are risky bets due to Covid-19, don’t interest me. Instead of investing in businesses that are struggling, I think it’s safer to focus on stocks that are benefitting from the digital revolution.

The post Forget easyJet shares. Here’s where I’m investing right now appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Gamma Communications, Microsoft, and Upwork. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Microsoft and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020