Canaccord cuts Jet2 price target but sees potential to buy into share weakness

(Sharecast News) - Canaccord Genuity cut its price target on Jet2 on Thursday to 2,250p from 2,325p after the company warned that full-year underlying earnings were set to be towards the lower end of the consensus range and reduced its winter capacity. Shares in Jet2 tumbled after the update, but Canaccord said it sees potential to buy into share weakness.

"We think Jet2 remains invested in quality and possesses excellent (customer-rated) product, high repeat custom, highly rated service; limited long-term fixed costs and strong flexibility; low risk of stranded capital; and balance sheet strength and minimal net debt," it said.

"We believe this positions Jet2 to grasp opportunities and to build stronger compounding profit returns for the future.

"In our view, Jet2's balance sheet strength is critical here - and leaves it with options to exploit that few can match.

"At circa 7x PER and circa 16% equity free cash flow yield, this leaves a sizeable value gap for shareholders to benefit from."

Canaccord said it values Jet2 using a weighted scenarios-based analysis based on historic peer multiples to deliver its new 2,250p target price.

At 1035 BST, the stock was down 12% at 1,419p.