Airline Stocks Able To Absorb Weakening Demand Favoured At Morgan Stanley

Morgan Stanley initiated coverage of easyJet, IAG and Wizz Air shares on Tuesday…

Analyst Conor Dwyer started Wizz Air with an Overweight rating, easyJet with an Equal-weight rating and IAG with an Equal-Weight rating.

Although it had little effect on IAG and easyJet’s share price, Wizz Air gained a modest 2.82% on Tuesday.

Dwyer noted the economic challenges that risk derailing the European air travel recovery, however, stated that a constrained capacity should prevent a sharp pricing reversal. Furthermore, the analyst told investors that he favours carriers able to absorb the weakening demand and take share in such an environment.

Analyst doubts remain persistent across the aviation industry, with several downgrades in recent weeks. Citi recently downgraded Wizz Air to a Sell rating, citing another year of losses for the airline, and easyJet was downgraded to a Neutral rating at Goldman Sachs after reduced estimates reflecting higher unit costs.

However, airlines have remained resilient. Positive earnings across the industry have excited several investors, and as a result, IAG shares have been able to gain 37% over the past three months. Meanwhile, easyJet shares are up 33%, and Wizz Air is 86% higher over the last three months.

Chart by Visualizer

Elsewhere, according to our latest data, consumer sentiment over the last week remains Neutral for easyJet.

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