BofA Merrill Lynch ups easyJet to ‘buy’ on European capacity constraints

The bank said it sees growth benefiting from capacity constraints in Europe, a bigger contribution from the holidays segment and stable ex-fuel unit costs.

BofA lifted its FY24 pre-tax profit estimate by 14% to £549m, which is 3% below consensus, as it models 1 percentage point higher year-on-year load factors in FY24E and for cost per seat to remain flat.

The price target change comes as the bank moves its valuation to a target price-to-earnings multiple of 11x, applied to its higher earnings estimates.

"We move back to a PE methodology as easyJet’s earnings and leverage have improved after the pandemic," it said.

"At 9x FY24E P/E, the shares trade below their 12x historical average, which we think is unjustified, given solid earnings growth prospects and a strong balance sheet."

At 1140 GMT, the shares were up 2.5% at 521.80p.