easyJet share price dips after downbeat Morgan Stanley comments

Shares in easyJet (LON:EZJ) closed deep in the red yesterday, pressured by downbeat comments at Morgan Stanley, which lowered its profit estimate for the low-cost carrier. The move came after the FTSE 100 company updated investors on its recent trading last week, forecasting that its full-year profits will come in at the upper end of its guidance.

easyJet’s share price lost 2.14 percent to end trading at 1,236.00p, underperforming the benchmark FTSE 100 index which closed 0.20 percent lower at 7,507.89 points. Despite the previous session’s drop, the shares remain up by nearly 23 percent so far this year, as compared with about a five-percent rise in the Footsie.

Morgan Stanley lowers profit estimate for easyJet

Morgan Stanley trimmed its forecast for easyJet’s profit before tax in 2017 and 2018 yesterday on the back of the low-cost carrier’s latest pre-close update. The analysts now expect £409 million for the current year, as compared with a previous forecast of £413 million, and £470 million next year, down from a previous estimate of £478 million.

Sharecast quoted the analysts as explaining in a note to clients that while winter tailwinds from lower fuel prices would offset pressure on yields to some extent, inflation was seen across infrastructure, maintenance and disruption costs over fiscal year 2018. The airline is further facing competitive pressure at its large bases in the UK, France, Italy and Switzerland.

Broker continues to see easyJet as ‘equal weight’

Despite the downbeat comments, Morgan Stanley reiterated its ‘equal weight’ stance on easyJet, keeping its price target of 1,230p on the shares. Investec meanwhile reaffirmed the low-cost carrier as a ‘hold,’ valuing the shares at 1,400p. According to MarketBeat, easyJet currently has a consensus ‘hold’ rating and an average price target of 1,241.48p. 

As of 08:07 BST, Tuesday, 10 October, easyJet plc share price is 1,230.66p.