BofA Merrill Lynch ups easyJet to ‘buy’ on European capacity constraints
easyJet
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17:15 18/12/24
Bank of America Merrill Lynch upgraded easyJet on Thursday to ‘buy’ from ‘underperform’ and lifted the price target to 640p from 470p on European capacity constraints.
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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.