Canaccord Genuity issues Jet2 with 'buy' rating

Canaccord Genuity said Jet2 potential's for profit recovery, careful market share gains supporting long-term earnings per share growth and equity-free cash flow suggested the firm was capable of supporting higher longer-term upside.

The Canadian bank sees a roughly 6% EPS compound annual growth rate between 2023 and 2026, reflecting market recovery, an improving revenue mix, and a strongly supported pre-tax profit despite likely summer 2023 pressures.

"Our forecasts envisage an almost flat PBT in 22/23E and no margin expansion beyond ~6% so these could potentially be conservative," noted the analysts.

Canaccord also added that summer 2022 will be the first "normal summer" after competitor Thomas Cook's exit from the market but cautioned Summer 2023 carried "potentially higher risks" for the UK consumer.

However, Canaccord thinks Jet2's "flexible business model" and ability to take market share will be demonstrated by this, which may lead investors to apply a higher multiple - though the analysts think this will be a "show me" story.