Davy Research has shuffled its ratings for FTSE 250 listed Wizz Air PLC (LON:WIZZ) and FTSE 100 component easyJet PLC (LON:EZJ), while reiterating its preference for low-cost carriers, as the airlines’ peak summer season begins.
In a note to clients, analysts at the Irish stockbroker upgraded their stance for Wizz Air to ‘outperform’ from ‘neutral’, citing the scope for 15% capacity and earnings growth over the next decade.
But they moved easyJet down to ‘neutral’ from ‘outperform’ as the stock has now broadly approached their unchanged target price of 1,850p.
They noted that the big topic in the airline sector is currently the “elasticity of supply to a change in the oil price.”
The analysts said that is an encouraging sign that should support pricing at airlines under coverage and their valuation multiples.
They also see the rising oil price as a likely catalyst for consolidation in the sector.
The analysts concluded that the “airline profit pool within Europe is shared among a select few and there is scope for these operators to improve competitive positioning and market share".