Analysts at Berenberg slashed their target price on low-cost carrier EasyJet from 750.0p to 560.0p on Wednesday but said the group’s “messy” third-quarter performance had masked its “significant” deleveraging.
Berenberg said EasyJet had finished the third quarter of its trading year with net debt of just £200.0m, roughly 0.2x EBITDAR, down from approximately £350.0m back in summer 2019.
“This reduction in net debt, coupled with the share price’s recent weakness leaves the carrier trading on an EV/IC of just 0.6x, slightly below where it troughed in 2008,” said Berenberg.
Although the German bank acknowledged that EasyJet’s handling of the June quarter had been “less than perfect”, disruption at airports was now easing at the same time as the airlines’ summer schedules become “more achievable” than before.
“Moreover, EasyJet’s balance sheet is now in a strong position to weather a slowdown should one materialise, with liquidity of circa £5.0bn representing 15 months of Covid-19 cash burn on our estimates,” said the analysts, who also reiterated their ‘buy’ rating on the stock.
“We cut our price target to 560.0p to reflect recent operational disruption and a slower profit recovery than expected before.”
Reporting by Iain Gilbert at Sharecast.com
