JP Morgan recommends 'overweight' on Ryanair, Wizz Air, but 'underweight' on IAG

JP Morgan Cazenove on Thursday said Ryanair remains its “top pick” of European airlines as it took a look at the sector.

The bank reiterated an ‘overweight’ rating on the budget airline and lifted its target price to €15.25 from €14.25.

Wizz Air is JP Morgan’s second choice of airlines. Its rating was also left at ‘overweight’ and its target price raised to 2,075p from 1,950p.

“Both stocks are rated ‘overweight’ given long-term potential to expand market share on the back of industry leading unit cost performance,” JP Morgan said.

“While we project greater absolute upside potential for Wizz, progress is presently challenged by restrictions on expansion of non-EU holdings. It also faces a relative fuel cost headwind and potentially expanded focus from Ryan Air in Eastern Europe.”

On International Airlines Group, owner of British Airways, JP Morgan said it is one of the most exposed airlines to the Brexit vote. It recommended an ‘underweight’ rating and cut the target price to €5.00 from €5.60 on its shares traded on the Bolsa de Madrid exchange.

However, JP Morgan said it emphasises IAG’s greater gearing to UK corporate activity and higher mix of non-UK point of sale. It also believes the airline is one the biggest beneficiaries of fuel costs falling to an average 13% in the coming year.