Fare warning sends Easyjet into descent
EasyJEt shares lost altitude after a broker warned that the airline may need to cut fares to draw in passengers over the winter.
The budget carrier’s stock dropped 1.5pc, or 9.2p, to 588.8p after analysts at Paris-based Kepler Cheuvreux said there was a risk Easyjet would need to ‘incentivise demand with fare discounts’ as increasing numbers of Covid-19 infections in some countries made passengers more hesitant to jet off for a winter break.
This was a particular concern given what analysts said was a ‘fragile’ environment for passenger bookings despite ‘encouraging’ numbers for the Christmas holidays so far.
A partial lockdown in the Netherlands on Saturday as well as ‘intensifying’ discussions over fresh restrictions in Germany were both noted as potential risks to passenger traffic heading into the festive period.
Even if lockdowns were not to be implemented, Kepler said, there was a danger that ‘the increasing number of infections and the ongoing discussions in the press about Covid risks will lead some people to be more cautious about making travel plans until the end of the year’.
The broker also flagged ‘increasing political opposition to lowcost carriers in many of Easyjet’s main markets post-Covid’, particularly after governments shelled out millions in support for national carriers during the pandemic.
These governments will be looking to ‘ensure that the national airlines are able to pay back the funds they have received from taxpayers’. The broker downgraded its rating on Easyjet to ‘reduce’ from ‘hold’ and cut its target price on the stock to 460p from 605p. The FtsE 100 rose 0.05pc, or 3.95 points, to 7351.86 while the
FtsE 250 climbed 0.27pc, or 64.06 points, to 23621.58.
The blue-chip index was weighed down by several miners amid worries a slowdown in the Chinese property market could hit demand for steel and other metals used in construction.
Russia-focused steel firm Evraz dropped 2.7pc, or 16.8p, to 603.2p while Glencore dropped 1.6pc, or 5.8p, to 362.15p. antofagasta fell 1.9pc, or 28p, to 1460p and BHP was down 1.9pc, or 37.4p, at 1923.4p.
Computer antivirus software group avast surged 7.1pc, or 39.4p, to 598.2p after its merger with rival Norton Life Lock cleared a regulatory hurdle in the US.
Mid-cap engineer IMI snapped up US-based Adaptas Solutions, a maker of lab equipment, for £202m ($271m). The deal is expected to immediately boost IMI’s earnings. But it made no impact on the shares yesterday as they crept up just 0.1pc, or 1p, to 1793p.
Wizz air signed a deal for up to 196 Airbus A321 aircraft as part of its expansion plans. The firm has ordered 102 aircraft, the bulk of which will be delivered between 2025 and 2027, and has the option to purchase another 94 planes that would be delivered between 2028 and 2029. The shares were down 0.2pc, or 10p, to 4765p.
Workplace software firm Kainos posted a 3pc year-on-year rise in pre-tax profits to £24.8m in the six months to the end of September as revenues boomed 33pc to £142.3m, helped by high demand from the healthcare sector during the pandemic.
But the shares tumbled 9.3pc, or 191p, to 1861p as investors appeared to think the profit rise did not reflect the double-digit jump in revenues over the period.
Bargain retailer B&M slipped 2.4pc, or 14.4p, to 585p after the stock was hit by downgrades from both Goldman Sachs and RBC.
Goldman knocked its rating down to ‘sell’ from ‘neutral’ and cut its target price to 580p from 620p, predicting flat earnings for the next three years due to supply chain disruption and higher costs.
RBC lowered its rating to ‘underperform’ from ‘sector perform’ and trimmed its target to 575p from 600p.