Shares in easyJet (LON:EZJ) plunged further into the red this morning after Societe Generale downgraded the stock following the airline's profit warning last week. Pointing to a soft demand environment and currency headwinds, the bank’s analysts slashed their stance from ‘hold’ to ‘sell’ and lowered the price target from 1,150p to 820p.
EasyJet’s share price has been flying lower in London today, having fallen 2.09 percent to 877.30 as of 10:21 BST. The company’s stock is underperforming the broader market, with the FTSE 100 index having added 0.01 percent to 7,045.28 points. EasyJet’s shares have almost halved in value over the past year, and are down by just over 50 percent in the year-to-date.
The budget airline said in a trading update last week that it expected its profit to have fallen in the year ended September 30, and further cautioned that it was set to take a hit from the slump in sterling. The update triggered a rating downgrade by Bank of America Merrill Lynch. Fellow broker Societe Generale said today that it reckoned the issues weighing on the easyJet in full-year 2016 would persist or intensify. It further noted the pound was now trading at a 30-year low versus the dollar, which would gradually inflate the carrier’s fuel bill, with hedging contracts expiring. SocGen expects further earnings declines in full-year 2017 and 2018.
Business is likely to be tough for easyJet over the coming months. Recent terror attacks might discourage some people from travelling and easyJet says the pound's weakness will make foreign travel less affordable for UK tourists.
"EasyJet is facing challenging times on a number of fronts, and it's one of the worst performing stocks in the FTSE 100 since the EU referendum," said George Salmon, an analyst at Hargreaves Lansdown. “The competition is hotting up too. Other airlines are looking covetously at easyJet's market share, with pressure coming from both the budget players Wizz and Ryanair, and 'premium economy' offerings like Vueling," he added.