Easyjet is ‘significantly undervalued,’ says Peel Hunt
Easyjet shares edged up on Thursday alongside a bullish earnings outlook from Peel Hunt for the year ahead.
“We believe Easyjet is significantly undervalued,” analysts at Peel Hunt said in a note, with shares rising around 2.8 per cent by mid-morning.
Sustained travel demand has underpinned the budget airline’s growth and is yet to tail off following a post-pandemic surge.
Easyjet is operating its largest ever UK flying program this summer, with more than 33m seats on offer.
A decline in half-year profit last week revealed little about the airline’s performance, given winter is typically a loss-making period for the industry and Easter fell later this year.
Easyjet said last week that current bookings indicated it would likely reach an annual target of £703m for pre-tax profit – a record.
Easyjet’s holiday arm success continues
The firm’s holiday arm has proven a huge success in recent years, providing additional resilience against any volatility in the airline market.
It delivered a bumper £13m increase in profit year-on-year to £44m, in the airline’s interim results last week.
Peel Hunt said it expected further growth there, supported by new base openings in Southend and Newcastle.
The wider economic backdrop may also provide some
Analysts added that “favourable fuel costs” and a weaker US dollar bumped up the carrier’s outlook “considerably.”
They said Easyjet could benefit from improvements to aircraft utilisation and monthly average staff per aircraft, while some gains could also come from fleet upgauging.
Shares are up 25.8 per cent over the last 12 months. That’s compared with a 25.3 per cent fall at its London-listed rival Wizz Air.
“We forecast around 60 per cent pre-tax profit growth from FY2024 to 2028 and remain confident in the group’s ability to meet its medium-term targets,” Peel Hunt said.
“We reiterate our buy rating and 900p target price.”