RBC Capital lifts easyJet price target after Q1 update

RBC Capital Markets hiked its price target on easyJet to 540p from 500p on Thursday and lifted estimates after the budget airline’s first-quarter update a day earlier.

The bank upped its EBITDAR estimates by around 9% in the next two financial years and by 6% in 2025/26E. It also lifted its 2023/24 pre-tax profit forecast by £87m to £602m, which is ahead of consensus of £558m.

By 2025/26, RBC forecasts pre-tax profit of £722m, which is modestly ahead of Eikon consensus of £709m, although below easyJet's medium-term ambition for pre-tax profit of more than £1bn.

"These upgrades are supported by lower fuel costs and FX," it said, adding that easyJet looks well positioned to deliver a strong result this summer, but that it sees greater upside elsewhere in the sector.

RBC, which rates the shares at ‘sector perform’, said it sees a more favourable outlook for European airlines than relatively undemanding valuations suggest, and the fare outlook as favourable for low-cost carriers, supported by constrained short-haul capacity.

"However, we see more attractive risk-reward prospects in Ryanair and Wizz Air shares. Among our sector perform rated coverage, we also note easyJet also trades on a premium to IAG on EV/EBIT and PE, but generates lower margins.”