Morgan Stanley ups target price on Easyjet, but leaves at 'equalweight'

Analysts at Morgan Stanley hiked their target price on Shares of Easyjet on the back of improved estimates for the airline's revenues per seat and higher projections for the cable exchange rate together with the impact from 'rolling forward' their valuation at improved multiples.

In particular, Easyjet's RPS were now seen growing by 2% in fiscal years 2018 and 2019 while the pound was seen trading at an average level of 1.33 against the US dollar, up from 1.31 previously.

Hence, the broker's estimates for the company's profits before tax in fiscal years 2019-2020 received a boost of between 2% to 5%.

Morgan Stanley added: "With encouraging revenue trends as a result of capacity leaving the market, and solid ancillary growth, we roll forward our valuation from FY18 to FY19 and update our EV/EBITDAR multiple from 8xto 9x, now at the mid-point of its 10 year historic trading range."

Combined, the earnings uplift and increased valuation multiple saw Morgan Stanley hike its target price on Easyjet from 1,230p to 1,490p.

Nevertheless, that implied just 6% of remaining upside to the stock; hence Morgan Stanley retained its 'equalweight' recommendation on the shares.