By 18 May, the easyJet (LSE: EZJ) share price had slumped 37% from its 2026 peak, reached in January. Since then, it’s regained that loss in a remarkably quick recovery. So what’s been happening, and what might we expect next?

And, perhaps more importantly, is this a stock that’s worth buying on the dips? Having followed easyJet for years, I think it might be.

Takeover target

Let’s get the elephant out of the room… the takeover interest from US private investment consortium Castlelake. That hit the news on 29 May, and gave easyJet shares a nice boost. By the time of writing, it’s helped push the price up around 25%.

When the news broke, easyJet management made an announcement…

The board of easyJet has not had any discussions with, nor received any approach or proposal from Castlelake. The board is clear in its duty of aiming to maximise shareholder value and will consider any proposal, should one be made. In any assessment, the board will be especially mindful of its valuation and deliverability.

— 1 June 2026

So we have no idea what a potential offer might look like, or what premium to the current market price we might see.

So what’s it worth?

At the moment, we’re looking at a forecast price-to-earnings (P/E) ratio of 11.7. If we compare that with other airlines, we see Wizz Air Holdings on a forward P/E of 14.4. Flag carrier International Consolidated Airlines is on a forward multiple of only 8.6.

That makes me think the easyJet share price isn’t particularly cheap right now. And I’m not seeing much in the way of undervaluation that might make a cheeky low-ball bid from Castlelake plausible.

So if a bid does materialise, will it have to be high enough to make it irresistible to easyJet shareholders? I think it might.

Back on the ground

Meanwhile, analyst recommendations had easyJet shares on an average price target of 448p — before the approach rumours emerged. The price has already climbed well above that. But there’s still a bit of breathing room below the most bullish target of 574p.

Working out how the shares might move in the next few years isn’t easy. That’s mainly because brokers see the airline bringing home erratic earnings per share, but essentially remaining flat overall between now and 2028.

So, what should investors do now?

What a choice

Firstly, I’d never recommend considering buying shares based on a potential buyout. It’s just too short-term and too risky. And this one seems a long way from becoming reality. If it comes off, shareholders could do well.

But if nothing happens, I could see the shares sliding again. And it reminds me of the multiple times over the years I’ve thought about buying on the dips — and I really do think that’s something would-be shareholders should consider.

The thing that’s stopped me is my long-standing rule to never invest in an airline, because of their uncontrollable external risks. I’ve been seriously tempted at times — but on balance I think my rule has served me well.

Should you invest £5,000 in easyJet Plc right now?

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Alan Oscroft does not hold any positions in the companies mentioned.