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Easyjet taking action to offset cost and cash concerns, Exane upgrades
Analysts at Exane like what they've seen from easyJet's new chief executive so far, noting that while it was still uncomfortable with the lack of a cost story, things had changed for the better.
Exane upped its stance on the low-cost carrier to 'outperform' on Thursday, stating that its previous 'neutral' stance reflected dual concerns over rising unit costs and a lack of free cash flow. Even though the stockbroker continued to be concerned about the group's cost story, it was happy to see Easyjet's attempts at increasing opex to drive returns from its holidays, data management, business passenger targeting and loyalty scheme which it saw as offsetting losses elsewhere.
Top-line growth outweighs analysts' issues with costs, though some free cash flow concerns remain, slightly offset by accelerated A321 growth, compounded by improved underlying earnings.
Following easyJet's "very strong set" of first-half results, Exane upped its target price on the airline to 2,000p from 1,650p.
"We think that the market is continuing to underestimate the likely positive impact of the shift in the group's operating capacity in Europe near-term, while we are increasingly convinced that the higher guided unit costs will be repaid longer-term in improved profit per seat."