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Due to the negative impact of the corona pandemic, panic driven investors have lost a lot of wealth in the UK markets during March this year. They have been hurt both emotionally and financially. Many of the strong stocks in the FTSE 100 basket are also under pressure with their financials painting a grim picture. Market experts believe that Easyjet Plc, Carnival Plc, and Centrica Plc would probably slide down to the FTSE 250 index.
These companies are currently a part of the London’s top equity benchmark index, FTSE 100. The FTSE 100 index reflects performance of the major businesses in the UK market with international presence. The businesses are ranked in the order of market capitalisation. The top ten businesses are the heavyweight stocks of the index. The share price movements in these businesses determine the movement of FTSE 100.
The FTSE 100 was hovering around GBX 7,500 in the last week of February. One month later, it slipped down to just under GBX 5,000 due to impact on businesses due to novel coronavirus. Market capitalisation is a function of number of outstanding shares multiplied by the current market price. This implies that the current market price is directly proportional to market capitalisation. If current market price goes down, the market capitalisation would surely go down.
(FTSE 100 chart, Source: Thomson Reuters)
Since, the businesses are ranked in order of market capitalisation, and Easyjet Plc, Carnival Plc, and Centrica Plc have suffered substantially in the FTSE 100 basket, they are on the verge of exclusion from the premium listings index. These companies have lost a lot of market capitalisation due to plunge in their respective share prices.
The outbreak of Covid-19 has devastated most of the economies around the world. To contain the spread of the contagious virus, local governments imposed travel restrictions and lockdowns. Most of the economic activities came to a sudden halt. Most of the sectors have witnessed catastrophe in terms of revenue loss due to the outbreak of the pandemic. However, a few of them have been severely impacted and are on the verge of collapse despite several stimulus packages announced by the government.
Travel & Leisure is one of the sectors which is on the verge of collapse due to travel restrictions imposed by the governments and weakened consumer confidence with regards to safety against the deadly virus. It has been very difficult for these businesses to get revenue through the door in these pressing times. The sector witnesses massive job redundancies along with weaker revenue generation. In addition, the businesses are struggling to make ends meet as they must refund the booking amounts due to cancellation of events/ itineraries by the consumers.
Stocks likely to move out of FTSE 100
- Easyjet Plc (LON:EZJ)
Easyjet Plc is a low cost airline carrier. On a Year to Date (YTD) basis, the stock delivered a negative price return of 49.33 per cent. The company’s share prices have slumped drastically, which has nearly eroded 50 per cent of the market capitalisation. The company has been burdened with higher maintenance cost as most of the fleets were grounded and might require health check-ups to get back into the skies. The industry is struggling to regain consumer’s confidence as of now. The company saw a ray of hope with the lockdown easing announced by the government, but the stringent guidelines announced for travellers entering UK will make things difficult for the low cost carrier. The company has laid off nearly 5,000 people to reduce its wage bill.
On 3rd June 2020, while writing at 08:52 AM, before the market close, Easyjet Plc’s shares were marginally up by 4.61 per cent against its previous day closing price; trading at GBX 758. The stock's 52 weeks High and Low was GBX 1,552.00 /GBX 475. The beta of the company stood at 1.6, indicating higher volatility as compared to the benchmark index. Easyjet Plc’s market capitalisation stood at £ 2,878.17 million.
- Carnival Plc (LON:CCL)
Carnival Plc facilitates vacations planning to various destinations across the world. On a Year to Date (YTD) basis, the stock delivered a negative price return of 69.22 per cent. The cruise company nearly lost 70 per cent of the market capitalisation due to the novel coronavirus outbreak. The company witnessed steep fall in share prices during mid of March. With disrupted operations and refunds triggered by cancellations, the company bled severely. The sector is grappling with weakened consumer confidence.
On 3rd June 2020, while writing at 09:06 AM, before the market close, Carnival Plc’s shares were marginally up by 2.18 per cent against its previous day closing price; trading at GBX 1,148. The stock's 52 weeks High and Low stood at GBX 4,058.00 /GBX 605. The beta of the company stood at 2.11, indicating higher volatility as compared to the benchmark index. Carnival Plc’s market capitalisation stood at £ 2,049.89 million.
- Centrica Plc (LON:CNA)
Centrica Plc is a global energy solutions and services group, which factors the changing needs of the customers in its offering and aims to switch to lower-carbon emissions. On a Year to Date (YTD) basis, the stock delivered a negative price return of 57.25 per cent. This implies that the market capitalisation of the company has gone down by nearly 58 per cent. The utilities sector has not been amongst the worst hit sectors due to this unprecedented crisis. However, Centrica seem to have certainly lost its way.
The company was already expecting a steep fall in revenues due to customers delaying their payment schedules, despite the surge in energy consumption by households. In addition, due to seizure of economic activities in the lockdown phase, the businesses have closed their sites, which has added to the decline in revenue streams and profitability.
In February, the company planned a hike in the minimum top-up amount for its prepaid meters, however, it did not materialize. In addition, the company went into losses due to tougher regulations of energy prices, with price-caps being imposed by the government.
On 3rd June 2020, while writing at 09:19 AM, before the market close, Centrica Plc’s shares were marginally up by 7.03 per cent against its previous day closing price; trading at GBX 41.22. The stock's 52 weeks High and Low was GBX 95.86 /GBX 30.21. The beta of the company stood at 1.55, indicating lesser volatility as compared to the benchmark index. Centrica Plc’s market capitalisation stood at £ 2,250.04 million.
