easyJet PLC’s (LON:EZJ) short-term uncertainty amid ongoing travel restrictions is masking an opportunity in the long term, according to analysts at Liberum.
In a note on Wednesday, the broker upgraded the budget airline to ‘buy’ from ‘hold’ but cut their target price to 900p from 1,000p, saying that the company’s liquidity is “sufficient to withstand further disruption through the winter” and that recent share price weakness represented an “attractive entry point”.
“While the [current travel] restrictions have been tighter than generally anticipated, it now seems increasingly likely that the restrictions for the remainder of this summer will be no worse than last year. We see no issues with demand at present, with international travel restrictions being the main obstacle to an industry recovery”, Liberum said.
The broker added that easyJet’s current fleet plan pointed to a “slightly faster recovery” than previously assumed, which in turn will drive a faster recovery in offered capacity.
Overall, Liberum’s analysts said they “remain positive on the long-term recovery in air travel” and that there is “clear evidence of pent-up demand”.
“We continue to expect the recovery to be led by leisure and social travel on short-haul routes, which plays to easyJet’s strengths. Its greater exposure to the UK than low-cost peers is negative, but easyJet has a degree of capacity flexibility that it is using to mitigate this”, the broker said.
“We accept there is still uncertainty in the short term. Resurgent COVID infection levels and concerns about new variants could see the recent relaxations of international travel restrictions reversed, either this summer or in the winter. However, we believe easyJet has the balance sheet strength to withstand this. The positive long-term prospects, based on efficient unit costs and leading positions in key capacity constrained markets, remain intact”, they concluded.
Shares in easyJet climbed 4.2% to 809.6p in early afternoon trading.