UBS says shares in this global airline are set to soar by 55%

Published Tue, Dec 6 20227:54 PM EST

Shares of London-listed airline easyJet are set to soar by 55% over the next year, according to UBS. The Swiss investment bank raised its price target to £6 ($7.34) a share after hiking its forecasts for passenger traffic and profitability at the pan-European airline. EasyJet's shares were trading at £3.87 on Tuesday afternoon, about 70% below its pre-pandemic levels. The airline mostly operates in Europe, but also flies further afield to destinations including Tunisia, Morocco and Jordan. A recent decline in global oil prices and the dollar index works favorably for easyJet, analysts at UBS said. Brent crude oil has fallen by 35% to $81.55 a barrel since its peak in June. Similarly, the dollar has declined by 12% against the British pound since hitting a record high in September. "With fuel seeing some downward pressure and a recovery in the £/$ as well as continued positive yield outlook we increase our forecasts," UBS analyst Jarrod Castle said in a note to clients on Dec. 5. "With traffic in our view continuing to ramp up, we think the company will be profitable in 2023e." EasyJet reported a loss of £178 million for the year ending Sept. 30 — significantly lower than the £1.14 billion loss it reported for the same period last year. The company told investors that it expects to see a busy Christmas trading period despite rising consumer cost pressures. UBS forecasts the airline will reach 91% of its 2019 passenger volumes next year and return to pre-pandemic levels in 2026. In the meantime, the Swiss bank also believes the company's balance sheet remains strong enough to ride out temporary dips in demand. According to its latest financial results, easyJet has a cash balance of £3.6 billion and net debt of just £0.7 billion. Not everyone is so bullish on the airline, however. Analysts at Stifel have a sell rating on the stock and expect its shares to fall by 22% from the current share price. "We remain cautious on the shares and the sector, expecting a sequentially weaker ticket yield trend going into next year's summer season, as the demand environment gets tougher, along with cost pressure due to fuel, labour and financing costs," said Stifel analysts Johannes Braun and Marc Zec in a note to clients on Nov. 29. "Longer-term we also see strategic challenges for EasyJet given strong capacity expansion by Ryanair and WizzAir , both operating on lower costs."