Jet2 Earnings and easyJet's Takeover (JET2); Concerns at TerraVest (TVK.TO)
Apollo pays 11x P/E for easyJet while Jet2 trades at 7x for a better business
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Jet2 (JET2)
More background: Deep Dive
Jet2 reported strong results on July 8 and launched another £250mm buyback, equal to about 10% of the market cap before the stock rose after results.
Just as importantly, rival easyJet accepted an acquisition offer from Apollo that demonstrates how cheap Jet2 is. Apollo’s offer is about 80% above easyJet’s undisturbed price and values it on 11x P/E or 10x EV/EBIT when treating leases and deferred revenues (customer deposits) as debt.
Jet2 trades on 7.2x and 6.6x respectively, for a ~35% discount to easyJet despite in my view having a better business (mostly package holidays rather than flight-only), better competitive position, growth rates, balance sheet, and management team.
EPS for fiscal 2026 was £2.1, despite being impacted by the Middle East crisis in March. Earnings this year will be heavily reduced by the crisis, but over three years I could see underlying EPS growing to around £3, driven by high single-digit revenue growth and buybacks per annum. That would put the stock on 5x P/E as things stand, even after the recent runup in the stock.
A takeover of easyJet by private equity may also make it less of a competitor to Jet2. easyJet has been the disruptive competitor over the last 12-18 months, growing its Holidays business and offering cheap fares on flights at some of Jet2’s northern bases. A private equity model more focused on immediate profitability and doing a sale & leaseback of planes would be helpful.
Much of Jet2’s full-year results (ending March 2026) had already been announced at the trading update in April, and the key points were:
Revenues = £7,482mm, +4% y/y
Package = £5,963mm, +3%
Flight-only & other = £1,519mm, +8.5%
EBIT = £440mm, -2%
Includes £11mm of Gatwick startup costs and £50mm of increased employment taxes and sustainable fuel premiums.
PBT = £551mm, -7%
EPS = 211p, -1%
Outlook:
Summer ‘26 capacity +7.7% (unchanged), bookings +7.1% (+6.2% at end of April), load factor +1.2ppts (“in line” at April)
“Reduced geopolitical uncertainty has led to strong booking momentum in recent weeks, supported by targeted price investment”.
Summer ‘27 capacity expected to increase 4%, with some aircraft deliveries delayed.
Others:
£250mm buyback announced, expected to complete by May 31, 2027. ~10% of market cap at the time of results. Share count now 191mm.
Gatwick performance ahead of expectations with aircraft to increase from 6 to 7 for Summer 2027. Package holiday mix higher than expected and load factor in line with other London bases despite going on sale later in the booking cycle.
Newer bases at Bournemouth and Luton have performed well, with Luton to see a 30% increase in capacity for FY27.
Will finance all A321neo deliveries for Summer ‘26 and ‘27, with target of 50% financing across the entire delivery to 2035.
Customer retention goes from strength to strength:
Holiday customers who rebooked in 25 months increased by 60bps to 61.2%, ~20ppts ahead of Jet2’s biggest competitor TUI.
Package bookings through the app increased 2ppts to 30%.
myJet2 members increased 45% to 9.3mm, allowing tailored browsing, discounts, and rewards.
Brand awareness among under-35s increased by 5ppts to 82%.
While the uncertainty created by the Middle East crisis has delayed customer bookings and will reduce profits this year (late bookings are lower margin because of discounting), this was a really strong set of results on what matters to the company’s value in the long run: customer retention, new bases, and the buyback.
Jet2 also appear to be taking share from its biggest competitor, TUI. In mid-May, TUI had reported that its Summer ‘26 Markets + Airline booked revenue in the UK was -10% y/y, and that the company was cutting capacity by 4% at a group level, and higher in the UK.
While I expect TUI’s bookings have picked up since mid-May, Jet2’s results at the time were already significantly stronger, with the company reporting Summer ‘26 bookings were +6.2% at the end of April. Overall, this is a roughly 15% difference in bookings, which given Jet2 and TUI each have about 20% market share converts to about a 3ppt swing in share to Jet2.
TerraVest (TVK.TO)
More background: Special Report, TerraVest’s next chapter, 2026 outlook
On June 5 and June 23, news publications reported (Le Journal de Montréal, then La Presse) that Quebec’s financial-markets regulator, the AMF, is investigating TerraVest’s Chairman and largest shareholder Charles Pellerin over allegations that he provided material non-public (“privileged”) information about TerraVest to members of his family and acquaintances. According to the reporting:
No charges have been filed. The matter is at the investigation stage — nothing has been proven or prosecuted, and Pellerin is entitled to the presumption of innocence.
The AMF obtained a search warrant (dated February 3) and carried out searches at Pellerin’s home and other locations on February 11 and 13.
The AMF alleges that people connected to Pellerin traded ahead of market-moving news after speaking with him: people close to him sold before TerraVest stock fell ~12% following disappointing Q1 results (February 12, 2025), and nine people he had spoken with bought before the stock rose ~38% after TerraVest announced the EnTrans acquisition (March 17, 2025) — the purchases often occurring within minutes of his calls. The AMF puts the alleged gains at roughly C$6.8mm.
On June 20, a proposed shareholder class action (an application for court authorization) was filed on behalf of shareholders who lost money after the June 5 stock drop. The claim names not only Pellerin but also TerraVest and its CEO and two CFOs, on the basis that they certified TerraVest’s financial reports — which stated the company’s internal controls were effective and that it had a code of ethics and an insider-trading policy. The suit has not been authorized or decided, and its allegations are unproven.
TerraVest stock is down 26% since June 5. While there is obviously a lot we don’t know, here is how I think these events affect the company and an attempt to quantify it in my valuation.