easyJet shares: Will the upturn continue?

• easyJet (LON: EZJ) share price reaches 709.4p per share
• Its CEO has told Ryanair’s boss to focus on his own airline
• With the rights issue, easyJet may potentially invest in greener aircraft, JPMorgan says
• Keen to take advantage of easyJet’s rising share price? Open an account with us to take a long or short position on the stock today.

easyJet stock price flies high

Shares of Luton-based easyJet advanced 4.2% day-on-day to end Monday at 709.4 pence.

The counter has soared 9.9% over the past five days. And since it went ex-rights on 13 September 2021, the British low-cost airline has climbed 20.2%.

Last week, the stock received a boost after the US announced it would relax travel restrictions on the UK and EU countries.

As of Monday, 14 analysts recommended ‘buy’, eight suggested ‘hold’, while one gave a ‘sell’ call. Their average target price was 765.52p per share, Bloomberg data showed.

easyJet boss hits back at Ryanair CEO’s comments

Hungarian low-cost airline Wizz Air has declined to comment on whether it had been behind the recent unsuccessful takeover bid for UK rival easyJet, Reuters reported.

Meanwhile, the chief executive officer (CEO) of easyJet, Johan Lundgren, has told the head of Irish low-cost carrier Ryanair, Michael O’Leary, to focus on running his own airline.

That was in response to O’Leary questioning the British company’s independence in his comments to the media.

O’Leary had told The Financial Times in mid-September that easyJet and Wizz would need to merge or be taken over, amid the aviation industry’s consolidation due to the pandemic’s impact.

In a Reuters interview, Lundgren described those remarks as ‘complete nonsense’. ‘I would urge anyone who runs an airline to focus on their own business rather than speculate about others, (where) they have no idea about what’s going on,’ he added.

easyJet is not opposed, in principle, to consolidation in the form of external transactions, but it must deliver value for shareholders and provide ‘a reason to believe in a successful outcome’, Lundgren said.

Is easyJet ‘heading in the right direction’?

Regarding easyJet’s £1.2 billion rights issue, Deutsche Bank analysts wrote that ‘the timing and amount of the equity raise make sense’. They reiterated a ‘buy’ rating while eyeing a 750p target on EZJ shares.

The company is expected to receive the net proceeds on 01 October 2021.

‘With easyJet’s balance sheet set to be in a much better place as it emerges from the Covid-19 crisis thanks to the proceeds from the rights issue, and with management focusing on cost to the potential benefit of profits per passenger, we see the group as heading in the right direction,’ Deutsche Bank said.

Meanwhile, JPMorgan was ‘neutral’ on the EZJ stock, and reduced its target to 595p partly given the significant dilution to earnings per share from the rights issue.

However, the rights issue ‘meaningfully improves EZJ’s gearing’ and also allows the company to invest in new airport slots and potentially in new, more fuel-efficient aircraft, the research team noted.

‘Assuming EZJ does not receive another takeover bid, we consider the shares fairly valued,’ JPMorgan said.

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