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Investing.com - JPMorgan downgraded easyJet Plc. (LSE:EZJ) stock rating from Neutral to Underweight and lowered its price target to GBP4.00 from GBP5.00, citing concerns about pricing pressure from high capacity growth. This comes despite easyJet trading at a P/E ratio of 7.72 and showing strong financial health with an overall score of "GREAT" according to InvestingPro analysis, which suggests the stock may be undervalued compared to its Fair Value.
The investment bank noted that easyJet is growing by approximately 7% into September 2026 in a competitive UK leisure market that has already seen elevated capacity growth from peers. This includes significant new route and base expansion which could take longer to mature. The airline has demonstrated revenue growth of 8.56% over the last twelve months, with a projected 7% revenue growth forecast for fiscal year 2026.
JPMorgan expressed concern that pricing may not be robust enough to offset higher costs, with ex-fuel cost per available seat kilometer (CASK) expected to increase by 4% in September 2026, driven by inflationary pressures across most cost lines.
The firm projects that winter losses will worsen in September 2026 compared to the prior year, with airline margins expected to weaken given the pricing and cost dynamics.
While easyJet Holidays is showing strong growth, JPMorgan believes this may not be sufficient to offset weaker airline margins at the group level. The company currently offers a dividend yield of 2.36%, with impressive dividend growth of 175.84% over the last twelve months.
In other recent news, Morgan Stanley has initiated coverage on EasyJet Plc. with an Underweight rating. The financial institution set a price target of GBP4.00 for the airline, highlighting competitive pressures and rising costs as key concerns. Morgan Stanley pointed out that EasyJet, despite its significant presence at major airports like London Gatwick and Milan Malpensa, is expected to face near-term challenges. These challenges include pressures on yields and profitability due to weaker demand trends and industry overlap on UK outbound routes. The bank’s profit before tax estimate for EasyJet’s fiscal year 2026 is 4% below the consensus, indicating a more cautious outlook compared to other analysts. These developments reflect the ongoing complexities in the airline industry, particularly for companies operating in competitive markets.
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