EasyJet flies higher on Cantor upgrade

Budget airline easyJet flew higher on Wednesday as Cantor Fitzgerald upped its stance on the stock to 'buy' from hold' and lifted the price target to 1,200p from 1,150p.

The brokerage noted EasyJet gave a cautious outlook for the year in its recent first-quarter statement and since then, consensus forecasts have been cut and the stock is down.

"We now think that the risks to earnings from capacity growth by rival carriers and weak sterling are fully priced in."

Cantor said demand for leisure travel is holding up well and disruption to operations from air traffic control strikes is muted.

"EZJ’s fundamentals remain sound. In particular, fleet expansion plans are flexible if market conditions deteriorate.

"EZJ’s network footprint and exposure to main airports is impressive (e.g. 800 routes and 130+ airports) and this underpins it business model of targeting higher spending passengers."

In addition, the brokerage said the stock's valuation is not challenging, trading on a calendar 2017 price-to-earnings of 10.7x versus a historic average of 15x.

Cantor highlighted the fact that easyJet could be demoted from the FTSE 100 as part of the latest quarterly review and said this could lead to volatility.

"Usually this is a temporary effect. In any case, from a fundamentals perspective, any weakness would present a good buying opportunity, in our view."

At 1050 GMT, the shares were up 1% to 960.61p.