Citi and Morgan Stanley 'mixed' on outlook for airlines

Analysts at Citi and Morgan Stanley sounded a mixed note on the outlook for airlines.

At Citi, they reiterated their 'sell' recommendation and 425.0p target price for EasyJet, despite flagging upside risks for the low cost carrier's second quarter revenues.

The analysts credited the company's better-than-expected sales to its increasing market share on high-yielding routes, such as to Portugal and France.

However, looking out to the medium to long-term, they remained cautious on the company's shares, due to the potential stress that high ownership costs might place on the balance sheet and because it would be difficult for EasyJet to keep its share in the holiday market.

At Morgan Stanley on the other hand, analysts said they saw the risks to airlines' summer results as tilted to the downside due to the potential drag on margins from soft demand and inflation.

On the flip-side, they judged that a lot of the negatives were priced-in, adding that "some" airlines showed good value on a recovered earnings basis.

Among the LCCs, they said that EasyJet and Ryanair looked "attractive", as did IAG in the legacy space.

Morgan Stanley lowered its target price for IAG shares from €2.5 to €2.3, for Wizz Air Holdings from 4,900.0p to 2,800.0p, for Ryanair from €21.0 to €20.0 and for Easyjet to from 900.0p to 800.0p.

Their recommendation for all those companies' shares was at 'overweight, save for Wizz Air's, which it had at 'equalweight'.