Irish broker Davy has upgraded its rating for easyJet PLC (LON:EZJ) in a note on the budget airlines sector highlighting better pricing trends into the summer period.
The broker has upped its stance for the FTSE 100-listed firm to ‘neutral’ from ‘underperform’ with an increased target price of 1,330p.
In late afternoon trading, easyJet shares were 1.2%, or 16p higher at 1,369p.
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In the note to clients, Davy’s analysts said the upgrade is based on easyJet’s “unit revenue momentum and the exposure to this trend from the operating leverage provided by its lowered margins”.
Looking at the overall sector, the analysts said: “We believe that the European low-cost carriers will continue to see improving pricing trends as we approach peak summer, albeit a consensus among the airlines has yet to form on whether pricing will be positive or negative”.
They added: “This trend is underpinned by improving demand profiles in key European markets, relatively easy comparisons (given terror-related and Brexit demand shocks in 2016) and slowing capacity growth.”
Sector risk-reward positively-biased
The analysts said they believe that “unit revenue trends are likely to continue to stabilise further in the short-haul market and that risk-reward is positively-biased among the stocks under coverage.”
They said their top pick within the sector is Ryanair PLC (LON:RYA) reiterating an ‘outperform’ rating and €25 price target on the London and Dublin-listed stock.
The analysts continue to rate Wizz Air PLC (LON:WIZZ) as ‘neutral’ with a price target of 2,400p.