Liberum upgraded easyJet to ‘buy’ from ‘hold’ on Wednesday as it argued that share price weakness has created an “attractive entry point”.
The broker said that while short-term uncertainty over travel restrictions persists, the long-term opportunity is intact.
It said easyJet’s liquidity is sufficient to withstand further disruption through the winter.
Liberum cut its current year forecasts on more cautious capacity plans, but lifted its 2023 estimates on a better long-term capacity outlook. It also lowered its price target on the shares to 900p from 1,000, reflecting the reduction in its short-term forecasts.
“We remain positive on the long-term recovery in air travel,” Liberum said. “We believe there is clear evidence of pent-up demand, with bookings surging whenever a relaxation of travel restrictions is announced.
“We continue to expect the recovery to be led by leisure and social travel on short haul routes, which plays to easyJet’s strengths. Its greater exposure to the UK than low cost peers is negative, but easyJet has a degree of capacity flexibility that it is using to mitigate this.
“We are confident that management’s actions on costs can not only offset the headwinds from having more leased aircraft, but also deliver a structural improvement in unit costs. However, this will not be evident one way or the other until capacity has returned to pre-pandemic levels.”
At 1110 BST, the shares were up 3.8% at 806.80p.