Share Prices & Company Research

Market News

20 Jan 2021 | 10:55

JP Morgan cuts Ryanair to 'neutral' on weaker earnings

(Sharecast News) - JP Morgan cut Ryanair shares to 'neutral' but stayed positive on Wizz Air as the bank reduced earnings forecasts for European budget airlines. Analyst David Perry said low-cost carriers' earnings would be hit by higher fuel costs and new Covid-19 lockdowns in Europe.

Perry increased his current year estimates for Ryanair and Wizz but cut his easyJet forecast by 17.1%. In the following year earnings will be 14.4% lower than expected at easyJet, 18.8% lower at Ryanair and 20.5% lower at Wizz, he said.

He reduced his rating on Ryanair shares from 'overweight' and cut his price target to €17.50 from €18.50. The shares' strong run over the past six months leaves only 12% potential return, he said.

Perry also questioned whether UK investors would like the idea of buying pricier American depositary receipts after Ryanair classed UK shareholders as non-qualifying nationals following Brexit.

Ryanair no longer has material upside to our PT [price target]," Perry wrote in a note to clients. "Also, we are not sure all UK investors will immediately embrace the ADRs as an alternative to the [ordinary shares], creating a near-term technical headwind for the share price."

After easyJet, rated 'neutral', announced it would refinance some lending it has "more breathing space" but remains less liquid than Ryanair and Wizz, JP Morgan said. Airlines are consuming cash with many of their planes grounded because of Covid-19 travel restrictions.

"We remain overweight on Wizz given its growth outlook, ultra-low cost base, and strong liquidity," Perry wrote. Wizz has enough liquidity to survive the unlikely prospect of no flying for 24 months, he estimated.

Perry trimmed his price target for Wizz to £57.25 from £58.50 and easyJet to 825p from 875p.

Get in touch today
Join Redmayne Bentley
Talk to us now about opening a new account or transferring your account from another provider
0113 243 6941
Get in touch today
Contact your local office
Contact your local office to find out more
The value of your investments and the income from them may go down as well as up, and you could get back less than you invested.
Continuing our Personal Service: View our Latest COVID-19 Update: 30th April 2021
We use cookies on this site to improve your experience and help us provide you with a better website. An explanation of the cookies we use and their purpose can be found within our Cookie Policy. Your continued use of this site means you consent to the use of cookies.