Broker tips: EasyJet, Reckitt Benckiser, AstraZeneca

Analysts at Liberum hiked their target price for shares of EasyJet and upgraded their recommendation from 'hold' to 'buy' on the back of the budget airline's moves to rein in non-fuel costs.

The self-help measures adopted by the carrier to stave off the pandemic's effects meant that it had addressed the broker's concerns about non-fuel costs and poor free cash flow generation.

Meanwhile, "clear evidence" of pent-up demand building meant that Easyjet did not need to wait for a vaccine to be rolled-out to rebuild traffic.

So while travel restrictions imposed by governments remained the largest brake on-demand and short-term challenges remained, "the long-term risks are diminishing."

In turn, the analysts lifted their target price for the stock from 500.0p to 1,300.0p.

Over at Davy, analysts downgraded EasyJet to ‘neutral’ from ‘outperform’ on Thursday as they argued that immediate upside has been achieved.

"We don’t quite see EasyJet as the ‘growth story’ it wants to be," Davy said, adding that it remains operationally geared to an improvement in demand conditions. "Further action is required on its cost base however and bookings must arrive in Q1 2021 to maintain stability in its liquidity position.

Davy said that while the budget airline’s FY 2020 results - a loss before tax of £835m - were in line with the revised guidance, it was encouraged by additional sale-leaseback activity, this time generating £280m from ten aircraft.

The analysts also expect easyJet to generate a loss before tax of £280m in FY 2021, with winter losses (£345m) significantly overshadowing summer profits (£65m).

Jefferies downgraded its rating on shares of consumer goods giant and Dettol maker Reckitt Benckiser on Thursday to ‘underperform’ from ‘hold’ and slashed the price target to 5,845p from 7,100p.

The bank said that with a vaccine rolling out in 2021, it now expects a dual challenge in the form of weaker Hygiene from the second quarter onwards and a slow cold and flu season in Q4/Q1, as lockdowns continue.

It said the anticipated roll-out of the BioNTech/Pfizer and Moderna vaccines from the first quarter on alters the landscape. While Jefferies expect hygiene-consciousness to persist, it anticipates a pullback from elevated FY20 levels, "including lapping a mother of all comps in March".

The bank now expects top-line earnings per share contraction of 4% and 10% and is 470 basis below FY21 OSG consensus in Hygiene, 550bps in Health and 360bps for the group.

"Beyond that, our concerns persist around the challenges of maturity in over the counter and the strategic bind in infant and child nutrition. The stock is a consensual long, FY21 numbers are too high and the recent modest relative correction isn't enough, in our view," it said.

Analysts at Berenberg struck a positive note on AstraZeneca shares after the drugmaker published full immunogenicity data earlier in the session for its Covid-19 vaccine candidate, AZD 1222.

AstraZeneca and Oxford University, both of whom are working on AZD 1222, said the vaccine triggered a similar antibody and T-cell response - which is known an immunogenicity - in all age groups with no anti-vector immunity by age.

Side-effects meanwhile were in line with expectations and less common in adults over age 56.

The analysts attributed the lack of a share price reaction to rival Pfizer and Moderna's announcements regarding the effectiveness of their own vaccines to the fact that AstraZeneca's was based on a different mechanism of action.

Furthermore, AstraZeneca had already indicated that it would make the vaccine available on a "not-for-profit" basis.

Berenberg kept its recommendation for AstraZeneca at 'buy' with a target price of 105.0p.