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Berenberg raises target price on EasyJet following Q3 update

By Iain Gilbert

Date: Friday 19 Jul 2019

Berenberg raises target price on EasyJet following Q3 update

(Sharecast News) - Analysts at Berenberg upped their target price on low-cost carrier EasyJet from 1,120p to 1,150p on Friday, noting that momentum appeared to have improved earlier than they expected.
Berenberg said EasyJet's third-quarter interim statement on Thursday had kicked off the "relative margin outperformance" that it was expecting for the coming year.

The German bank said EasyJet's "resilient late-booked yields" had "surprised" it and stated that it saw "continued evidence of supply restraint" by the airline and the industry as a whole.

"We expect this to support pricing that disproportionately benefits EasyJet versus its low-cost peers," said Berenberg, which also reiterated its 'buy' rating on the shares.

Berenberg said that even if demand slows, it expects pricing to continue to benefit from incremental capacity deceleration - 10% to 3% from 2019 to 2020 for the group and to below 4% in 2020 for the industry as a whole.

"We model EasyJet's 2020 first-half revenues per seat up 2.7% year-on-year, with upside if a sizable airline in EasyJet's markets fails," said Berenberg, which also praised the company for its ability to continue taking "profitable market share" from flag carriers.

Berenberg also said EasyJet's likely near-term fleet mix shift to smaller A320neo aircraft could support free cash generation in 2020, albeit offset by incremental unit costs.

As of 1400 BST, EasyJet shares were flying 1.44% higher at 1,091.50p.


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