Budget airlines easyJet PLC (LON:EZJ), Ryanair Holdings plc (LON:RYA) and Wizz Air Holdings PLC (LON:WIZZ) had had their target prices hiked by analysts at Morgan Stanley as the investment bank said it is “positive” on the recovery of air travel demand in 2021.
In a note on Thursday, the bank said they expected the rebound in air travel will be “strong once travel restrictions are lifted”, although they cautioned that volumes were unlikely to return to 2019 levels by the summer.
Morgan Stanley said Ryanair, which it raised to EUR18 from EUR15.60 and retained at ‘overweight’, was a “structural winner” with less potential downside in case the recovery in demand took longer to materialise.
“We think for some stocks, the rerating could be justified, as the financial negative impact of the Covid crisis is driving some of their peers to look to reduce their fleets and focus on the most profitable routes, leaving a window opportunity for the financially stronger players, with a low cost structure, to grow faster by taking share from competitors that are retrenching”, the bank said, adding that Wizz was in a similarly advantageous position to Ryanair, and increased its target for Wizz to 5,000p from 4,200p and retained the ‘overweight’ rating.
However, should the air travel sector recover quickly, Morgan Stanley said easyJet “looks more attractive” if airlines managed to achieve peak unit profits and trade at peak multiples, and increased their target price for the carrier to 900p from 800p and held the rating at ‘equal weight’.
Shares in Ryanair were 0.9% lower at EUR15.84 in late-morning trading, while Wizz Air rose 0.3% to 4,613p and easyJet dropped 1.5% to 827.2p.