JPMorgan upgrades easyJet to ‘overweight’

Looking at easyJet, Ryanair and Wizz Air, the bank said its key takeaway from the low-cost carrier results across all three names was encouraging early comments on demand/pricing into 2024, hence the easyJet upgrade.

JPM noted that in its outlook it took a cautious view due to capacity growth meeting elevated yields in an uncertain backdrop, but with a preference for the LCCs where it saw better opportunities to grow profitability amid more resilient pricing.

"The results period reinforces that view so far; with booked summer yields up healthily yoy. Short-haul is not immune from capacity growth, with schedules +10% for adjusted intra-European capacity in H1 24E; however constraints around the GTF issue are helping to tighten supply," it said.

The bank said it was upgrading easyJet with good momentum now into summer and further upgrade potential on fares.

"Our Sep-24/25/26E profit before tax estimates for easyJet increase by 26%/20%/16% respectively due to higher revenues. We now sit circa 8% above Sep24E Bloomberg consensus for PBT at £639m," it said.

JPM maintained its ‘overweight’ rating on Ryanair, which it said remains the best "structural" story in a commoditised industry, and with a pathway to net income growth and large free cash flow generation in March 2025E.

As far as Wizz is concerned, it kept the shares at ‘neutral’, citing continued uncertainty and questions over execution.

"Uncertainty reigns high and execution will be key over the coming quarters," it said. "We remain neutral given the specific issues impacting Wizz, and see much cleaner stories to play elsewhere."

JPM lifted its price target on easyJet to 690p from 520p.