On Friday, BofA Securities updated its financial outlook for EasyJet Plc. (EZJ:LN) (OTC: ESYJY) shares, raising its price target to £750.00 from £730.00, while reaffirming a Buy rating on the stock.
The firm's decision followed EasyJet's announcement of a narrower-than-expected loss before tax for the first half of the 2024 fiscal year, which ranged between -£340 million to -£360 million, surpassing the consensus estimate of a -£407 million loss.
The airline's financial performance in the second quarter showed a year-over-year Revenue Per Seat (RPS) increase of 8%, outpacing the analyst's projection of a 6% rise. This uptick was attributed to a 9% year-over-year growth in ticket fares.
In terms of passenger numbers, EasyJet reported carrying 16.8 million passengers in the second quarter, marking an 8% increase from the previous year, although load factors dipped slightly by 1 percentage point to 87% due to lost bookings, partly as a consequence of extended impacts in the Middle East.
Based on these results, BofA Securities has revised its full-year 2024 profit before tax estimate for EasyJet upward by 3% to £668 million, which stands 4% above the market consensus. This adjustment reflects the airline's stronger than anticipated performance in the first half of the year.
The firm justified the price target increase by applying an unchanged target price-to-earnings (P/E) multiple of 11 times to its enhanced earnings estimates. BofA Securities highlighted that EasyJet's current trading at 8 times FY24 estimated P/E is below the historical average of 12 times. They cited the airline's robust earnings potential and strong balance sheet as reasons why the current valuation does not reflect the company's solid financial prospects, reinforcing their Buy recommendation.
InvestingPro Insights
According to the latest data from InvestingPro, EasyJet Plc. (OTC: ESYJY) holds a market capitalization of $4.91 billion, with a P/E ratio that stands at 12.16, indicating a market valuation that aligns with the company's earnings. The adjusted P/E ratio for the last twelve months as of Q4 2023 is slightly lower at 11.58, which may suggest a more attractive valuation when considering the company's recent performance. The revenue growth for the same period is impressive at 41.64%, reflecting the airline's strong recovery and operational efficiency.
Two InvestingPro Tips that stand out for EasyJet are its strong balance sheet, holding more cash than debt, and the prediction by analysts that the company will be profitable this year. Such financial stability and positive outlook are key factors for investors considering the volatile nature of the airline industry, which has been further highlighted by the company's stock price movements.
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