RBC is sticking with a bullish rating for Jet2 PLC (AIM:JET2) despite last week's profit warning, albeit the Canadian bank has clipped its target price.
It retains an ‘outperform’ rating, and, in a note, argued that the shares remain attractively valued despite near-term pricing pressures.
Jet2 last week, on Thursday, told investors it now expects earnings (EBIT) for the year ending March 2026 will be towards the lower end of the market consensus range, of £449 million to £496 million.
The budget airline and package holiday operator, in a statement ahead of its annual general meeting, said it has reduced winter 2025/26 capacity to 5.6 million seats from previous plans for 5.8 million.
It noted, meanwhile, that its summer 2025 capacity of 18.5 million seats was 8% higher than last year. Package holiday customers grew by 2% and flight-only passengers rose 17% to the end of August.
RBC, in its noted, reacted by lowering its earnings per share estimates by around 6% for FY26 and by an average of 5% across FY26-FY28.
The bank's analysts, meanwhile, also noted Jet2 had pointed to “increasingly attractive” flight-only fares as the main driver behind its downgraded guidance. RBC explained that softer pricing reflects a combination of consumer caution, unseasonably warm UK summer weather, and higher capacity on certain beach routes. Analysts suggested some of these pressures may ease, leaving a more favourable comparison base in FY27.
Despite the reductions, RBC continues to highlight Jet2’s strong returns profile.
The travel group is expected to deliver return on capital employed above 14% and has a track record of robust growth, with a 19% revenue CAGR over the past decade. Over FY25-FY29, profit before tax is projected to grow at a compound annual rate of around 6%.
“We think Jet2 trades attractively given a ROCE >14%,” RBC analysts said.
Nevertheless, the Canadian bank cut its price target to 2,150p from 2,200p.
At the current share price of 1,411p, the RBC target still implies more than 50% upside. Jet2 trades at around 7 times FY26 forecast earnings, a discount to European airline peers on EV-based metrics, and, RBC said free cash flow yield of about 10% supports the investment case.