Interactive Investor

Forecasts still bright for AIM’s top stock

AIM’s most valuable company continues to shine but conditions are not so favourable for a FTSE 250 stalwart, leaving its shares at a multi-year low.

15th February 2024 15:28

by Graeme Evans from interactive investor

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The strong run for AIM’s biggest stock continued today as package holidays firm Jet2 Ordinary Shares (LSE:JET2) nudged up profit forecasts and reported encouraging levels of bookings for this summer.

The shares are up 37% since late October, including a rise of 42p to 1368p after today’s update showed strong demand for its destinations in the Mediterranean and Canary Islands.

The group’s £2.8 billion valuation is about £300 million ahead of Burford Capital Ltd (LSE:BUR) at the top of AIM, leaving it on a par with Greggs (LSE:GRG) in the top 20 of FTSE 250 companies.

City firm Peel Hunt regards a current rating of 7.4 times 2024 earnings as “far too low” after reiterating its “buy” recommendation and 2,200p target price.

It said the recent trends and next month’s opening of an 11th UK base in Liverpool highlighted further growth opportunities not captured by its current forecasts.

In addition, the on-time delivery of five new A321neo aircraft and a further six by the 2025 financial year should allow the group to continue expanding in a capacity-constrained market. 

The broker added: “Jet2 has a well-invested, high-service customer proposition that continues to  gain market share.”

Jet2’s update forecast underlying profits of between £510 million and £525 million for the year to 31 March, up from a previous range of £480 million to £520 million.

It has been helped by the mix of higher margin package holiday customers coming in slightly ahead of last winter at approximately 60%.

Seat capacity is up 12.5% for the summer,  which is above the 8% forecast by UBS. Pricing is higher but with the company mindful over how economic conditions might impact consumer spending.

In the FTSE 250, Genus (LSE:GNS) shares today stood at their lowest level since 2017 after the animal genetics company downgraded guidance for 2024 results.

Genus had been expecting an improved second-half performance but with trading conditions still tough in China it now sees annual profits of not less than £58 million compared with the City’s consensus of £73 million.

The weakness is China continues to be driven by low pork pricing, along with weak demand for dairy genetics due to a double-digit decline in herd size.

Genus is due to report half-year figures next week, with profits forecast to be in line with City hopes at around £29 million.

The shares slumped 352p to 1772p, which compares with a level of more than 3,000p just under a year ago. Peel Hunt reduced its target price from 4.500p to 3,500p but said weakness for the shares created a buying opportunity.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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