According to the Wall Street investment bank there is “not enough reward for the execution risk”.
“Our key concern is that cash generation does not support [the] valuation,” it added.
Its sum-of-the-parts price target is 142p - 58p lower than the current share price.
In the wake of yesterday’s earnings alert, Bank of America Merrill Lynch’s number crunchers downgraded their recommendation on EasyJet to ‘neutral’ from ‘buy’. The price target was cut to £10 from £13 a share.
“easyJet has a number of strengths that remain alluring,” the Merrill note starts (in rather promising fashion).
“The company has a relatively strong balance sheet, a business-oriented airport exposure (which is poised to take share over the legacy carriers in the long-term) and a well-respected CEO at its helm.
“However with a lack of pricing momentum, alongside the uncertainties facing the UK (both growth and foreign exchange; leading to management not providing typical pricing guidance) and a lack of tangible cost savings in 2017, it is hard to see how easyJet will regain its (much-needed) earnings momentum in the near-term.”
The budget airline yesterday said it had been buffeted by security fears and the weak pound.
Sticking with downgrades, Morgan Stanley has gone to ‘equal weight’ from ‘overweight’ on Centrica (LON:CNA), while UBS has chopped Aveva Group PLC (LON:AVV) from ‘buy’ to ‘neutral’. The Swiss bank did the same to recruiter Hays (LON:HAS).
JP Morgan, meanwhile, has been looking at the mid-caps to identify its top picks. They are Aggreko PLC (LON:AGK), Bellway PLC (LON:BWY), Ophir PLC (LON:OPHR), Tullow Oil plc (LON:TLW) and Vectura PLC (LON:VEC).
Bank of America Merrill Lynch was active among the small-caps too with upgrades to two resource focused companies.