EasyJet PLC (LSE:EZJ) has been upgraded by RBC Capital Markets as it sees the budget airline as "well positioned to exceed consensus expectations" in its 2026 financial year, supported by favourable foreign exchange and fuel trends as well as internal profit-improvement efforts.
Several contributing factors are expected to boost profits, including reducing winter losses, "upgauging" to the lower unit-cost Airbus A320neo and A321neo aircraft, and growth of its Holidays business, all backed by data showing strong travel demand.
The broker moved to an 'outperform' rating and lifted its price target on the airline to 650p from 570p, forecasting headline profit before tax of £791 million in FY26E, around 3% ahead of consensus.
RBC even felt it might be "conservative" in forecasting 14% PBT growth in FY26E "given scope for an increased contribution from upgauging and reduced winter losses, and continued holidays growth and fuel tailwinds".
Strong UK travel demand underpins the forecast, with RBC pointing to website traffic and Barclaycard data showing year-on-year growth in travel spending. easyJet has sold 80% of its Q3 and 42% of its Q4 capacity, with bookings tracking ahead of last year.
The valuation case is also considered attractive, with easyJet shares trading at around 7.4x times forecast earnings, with RBC’s target implying an 8.3x multiple.
"Increased confidence in easyJet's profit progress prospects beyond FY26E (towards its medium term targets) could result in upward pressure to these multiples," the analysts added.