Interactive Investor

Upgrade lands easyJet nearer FTSE 100 return

The shares have soared since October, but City experts reckon there’s more to come from easyJet as the low-cost airline nears a FTSE 100 return.

14th February 2024 15:38

Graeme Evans from interactive investor

Low-cost airline easyJet (LSE:EZJ) moved closer to a FTSE 100 return today as another City upgrade helped the shares to continue their strong start to 2024. 

Deutsche Bank sweetened its price target by 5.5% to 670p after reviewing its earnings forecasts in the wake of last month’s better-than-expected first quarter results.

The bank’s move contributed to a strong session for the Luton-based carrier, which is now worth more than £4 billion as the biggest stock in the FTSE 250 index.

The airline lost its place in the top flight during the early months of the pandemic, when shares dipped below 400p. It raised £1.2 billion through a rights issue the following year, but the recovery in its valuation only really began in October as part of a 57% rise in 2023.

The shares are up 12% so far this year to 563.2p, buoyed by the prospect of a first post-pandemic dividend through the payment of 4.5p a share on 22 March.

The planned distribution of £34 million represents 10% of after-tax headline profit, with the company hoping to increase this to 20% when it announces the dividend for next year.

Recent demand for shares has come on the back of a record summer performance and signs that around three-quarters of Britons are planning to spend more on their holidays this year.

It said last month that disciplined capacity growth and productivity benefits meant it expects a lower seasonal first-half loss, despite a £40 million impact from the Middle East conflict.  

Chief executive Johan Lundgren added: “We see positive booking momentum for summer 2024 with travel remaining a priority for consumers.”

Deutsche Bank said the December quarter loss of £126 million was much smaller than the £172 million it had forecast.

Today’s upgrade also factors in lower than expected fuel costs based on the group's latest hedging positions and the material reduction in the cost of carbon offsets.

Among other City analysts, Barclays recently switched its recommendation to 'overweight' and lifted its price target from 450p to 700p. 

Bank of America has also moved from 690p to 730p as it looks for easyJet Holidays to become a key part of the medium-term growth story.  The division reported a 48% rise in customer numbers in the most recent quarter and expects to exceed 35% across the financial year.

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