easyJet share price rallies as Investec hikes rating despite ‘disappointing’ results

Analysts point to airline’s ‘encouraging’ guidance

easyJet share price rallies as Investec hikes rating despite ‘disappointing’ results

Shares in easyJet (LON:EZJ) have been in demand for a second session, building on yesterday’s gains, as analysts at Invested lifted their rating and valuation on the low-cost carrier. The move follows the FTSE 100 group’s full-year update yesterday.

As of 13:30 GMT, easyJet’s share price had added 2.56 percent to 1,377.34p, outperforming the broader London market, with the blue-chip FTSE 100 index currently standing 0.58 percent higher at 7,454.04 points. The airline’s shares gained 5.09 percent in the previous session.

Investec turns bullish on easyJet

Investec upgraded its rating on easyJet from ‘hold’ to ‘buy’ today, and hiked its price target on the shares from 1,400p to 1,600p, despite the airline’s ‘disappointing’ results. The lowcost carrier posted a drop in revenues yesterday, but revealed that  it had seen ‘encouraging’ trends in the first quarter of the new financial year, with the ongoing industry turbulence hitting rivals.

WebFG News quoted the analysts as pointing to the airline’s guidance and potential purchase of insolvent rival Air Berlin, which would give the London-listed group another market leading position. The broker’s analyst Alex Patterson further reckons that the cessation of flights from other rivals who had fallen into insolvency is a tailwind, as are the flight cancellations by peer Ryanair.

Higher profits estimate

Patterson further hiked his estimate for easyJet’s profits before tax in the fiscal year 2018 to £507 million.

“We anticipate that there will be further restructuring of short haul capacity by other carriers and with low margins, easyJet is extremely sensitive to increases in fares,” the analyst elaborated, as quoted by WebFG News, adding that “fuel hedging for the FY19 is also better than we expected and may give a short-term competitive advantage”. 

As of 13:58 GMT, Wednesday, 22 November, easyJet plc share price is 1,366.00p.

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