Panmure Liberum has raised its price target on Jet2 PLC (AIM:JET2), the package holiday and airline group, to 1,700 pence from 1,200 pence, while keeping a buy rating.
The broker lifted its earnings per share forecasts by 13 to 17%, helped by a new 250 million pound share buyback.
Analyst Gerald Khoo said Jet2's recent full-year results, for the year to March 2026, showed record customer numbers and revenues alongside strong customer satisfaction and operational performance.
The one weak spot was the bottom line, with both profits and free cash flow going backwards.
Panmure Liberum attributed the profit fall to strong capacity growth, including new bases, and the discounting needed to fill the extra seats.
Khoo cautioned that the pressures on margins are likely to persist through the current year.
Pricing remains positive for package holidays but is down by mid-single digits for flight-only seats, and modest price rises look unlikely to fully offset supplier cost inflation, particularly in hotel rooms.
The broker said the Middle East conflict that began a month before the year-end had no discernible impact on the figures, reflecting Jet2's policy of hedging fuel costs close to fully at the start of each season.
Khoo argued that the short-term headwinds are obscuring a more attractive long-term outlook.
He said Jet2's leadership of the resilient and structurally growing UK package holiday market is not reflected in its rating.
Looking through the near-term noise, the broker values the shares on longer-term earnings, arguing that current market forecasts for the 2029 financial year are too pessimistic on margins.
Khoo said resilient demand should allow Jet2 to recover from inflationary pressures and restore margins over the next three years.
The broker also flagged a rising capital expenditure bill, with gross spending of 4.6 billion pounds due over the next five years as the group takes delivery of new Airbus aircraft.
Panmure said Jet2's new capital allocation framework, which tolerates higher leverage, should comfortably accommodate continued shareholder distributions in the near term.
