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easyJet flies into more turbulence as Deutsche downgrades forecasts

easyJet flies into more turbulence as Deutsche downgrades forecasts
easyJet feeling the wrath of City analysts today

The budget airline easyJet plc (LON:EZJ) flew into more turbulence as the downgrades continued in the wake of its earnings alert last week.

The heavyweight transport team at Deutsche Bank piled on the misery as it downgraded its profit forecasts for 2017, 2018 and 2019 by 5%, 14% and 20% respectively.

For the current year it is predicting pre-tax profits in the order of £459mln, which it admits may be a little optimistic.

Sticking with its ‘hold’ recommendation, Deutsche reckons the stock is worth £10.

The London team of French bank Societe Generale is even more pessimistic on the outlook for the carrier, which has been hit by the weak pound and worries over international terrorism.

It reined in its valuation to 820p from £11.50 and repeated its ‘sell’.

The tens of thousands of Chinese that flocked to the capital last week is a reminder that sterling’s slump will also have a positive impact for UK PLC.

In fact many of the travellers from the east departed bearing gifts from London’s fashionable upmarket boutiques in Mayfair.

A major beneficiary of the rock bottom pound is likely to be Burberry (LON:BRBY), according to Deutsche, which raised its price target to 1,475p from 1,350p. That said, it remains a ‘holder’ of the stock given the price raced ahead in early deals and past that valuation.

Fellow fashion chain, Ted Baker (LON:TED) will ‘outperform in all weathers’, according to the number crunchers at Liberum. They restated their ‘buy’ advice and £31 a share price target.

The chip designer Imagination Technology (LON:IMG) also received a boost from Liberum, which reckons the stock, which trades at a 33% discount to its peers, is just too cheap.

It raised its price target to 325p from 256p, saying it too would be a beneficiary of the pounds weakness, along with the advent of the iPhone 7.

The mining analysts at UBS have upgraded their prices for coal and base metals, leading to a boost to its profit forecasts sector-wide of 5-25%.

At the same time, the Swiss bank became more positive on one mining major and more negative on another.

The latter first: It has gone to 'neutral' from 'buy' on BHP Billiton (LON:BLT) and has shifted its “preference” to Rio Tinto (LON:RIO).

Anglo American (LON:AAL), meanwhile, has been raised to ‘neutral’ from ‘sell’.

Its overall preference in the sector is Glencore (LON:GLEN) because of its base metal exposure, free cash flow and “dividend upside”.

UBS is slightly more bullish on the outlook for the sector, which has been dogged by a slowdown of China, formerly a growth engine for a decade-and-a-half.

“While we don't really expect this to change in the short to medium term, there is likely to be some contraction over the longer term.

“SUBSequently, we have noted with interest the significant number of governments around the world that are now proposing to lift infrastructure investment.

“In our view, a step-up in global infrastructure funding through fiscal policy could see incremental demand for commodities support prices at higher levels.”


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