Jet2 shares backed by Jefferies and RBC amid weakness; 21% upside seen

Investing.com -- Jefferies and RBC Capital Markets have reiterated their bullish views on Jet2 (LON:JET2), highlighting recent share price weakness as a buying opportunity. 

Both brokerages maintain a price target of 2,200p, implying a 21% upside from Jefferies’ reference price of 1,825p and a 34% upside from RBC’s noted level of 1,644p.

Jefferies made minor model adjustments following Jet2’s FY25 results, raising its FY26 profit before tax (pre-FX and exceptionals) forecast to £577 million from £573 million. 

EPS estimates for FY26–27 were increased by less than 1%. Jefferies sees no material deterioration in demand for package holidays, which it identifies as Jet2’s core profit driver. 

Package holiday pricing remains stable with a modest average increase, while flight-only pricing is incrementally softer. However, Jefferies notes that flight-only sales contribute minimally to group earnings.

Seat capacity data from Cirium suggests a manageable market environment. From the UK to Jet2’s destinations, market supply rose 7% in H1 FY25, 6% in H2 FY25, and is expected to grow 3% in H1 FY26. 

Jefferies interprets this as either flight-only route softness or increased competitive pressure from carriers like Ryanair.

Jefferies anticipates a 10% compound annual EBIT growth over the next two years, driven by stable fuel and FX costs and moderating non-fuel inflation. 

For FY26, the brokerage models 3.5% like-for-like operational expenditure inflation, with total cost growth around 9%, aided by efficiency gains from the fixed-cost base and new-generation aircraft. A 1 ppt swing in group opex inflation could impact EBIT and pre-tax profit by around 10%.

Jet2’s vertically integrated model is highlighted as a key strength. Functions like baggage handling, maintenance, pilot and crew training, and distribution are managed in-house, contributing to a 61% repeat booking rate and a 0.05% cancellation rate. A new maintenance facility in Manchester is due to open in summer 2025.

Jefferies expects further shareholder returns in FY27, supported by projected capital expenditure of £550 million and £600–700 million in owned cash. 

The brokerage cites Jet2’s focus on maximizing returns from its core business and maintaining a strong balance sheet.

RBC Capital Markets also maintains an “outperform” rating, seeing Jet2’s valuation as compelling. RBC lifts FY26–28 EPS forecasts by 1–2%, with FY26 PBT&FX projected at £576.5 million, near consensus.

RBC echoes that package holiday pricing is modestly ahead and notes a late booking profile limiting near-term visibility. 

However, Barclaycard data shows travel and airline spending rose 5% and 7.5% year-over-year, respectively, over the past three months. 

Jet2’s strong Net Promoter Score and brand loyalty are expected to support ongoing growth.