It is time to buy easyJet PLC (LON:EZJ) according to European investment bank Berenberg as the valuation discount has reached an “extreme level” and the budget airline is geared to increasing consumer confidence.
With a price target of 800p the 'buy' recommendation suggests some 30% upside to the airline’s current price.
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“Leisure focused booking growth and industry restraint – evidenced by our new top-down capacity model – should generate momentum. Instead, easyJet has performed in line with distressed flag carrier peers,” Berenberg analyst Adrian Yanoshi said in a note to clients.
“We expect easyJet’s Q3 interim management statement to highlight slow demand progress. Many airlines’ messaging, in our view, will reinforce a positive feedback loop by outlining customer safety and comfort, areas in which easyJet excels.”
The analyst added: “easyJet’s shares offer a historically wide P/E discount to Ryanair (over 6x) on its 2022E. Meanwhile, an impaired asset valuation suggests easyJet trades at a c45% discount to its fleet value. These trough levels suggest a high margin for error, combined with broadly negative sentiment that could soon improve.”
In London on Wednesday, easyJet shares were trading at 609.8p down 1.8%.