Jet2 shares backed by Jefferies and RBC amid weakness; 21% upside seen

Jefferies and RBC Capital Markets have reiterated bullish views on Jet2, maintaining a 2,200p price target and citing recent share price weakness as a buying opportunity. Both brokerages underscore the strength of Jet2's core package holiday business, which shows stable demand and pricing despite minor softness in flight-only sales and increased market supply. Analysts project robust future earnings, including 10% compound annual EBIT growth, driven by Jet2's vertically integrated model, operational efficiencies, and strong balance sheet, with expectations for continued shareholder returns.

Analysis

Two leading brokerages, Jefferies and RBC Capital Markets, have reaffirmed their bullish outlook on Jet2 (LON:JET2), maintaining a 2,200p price target and highlighting recent share price weakness as a compelling buying opportunity. The positive thesis is anchored in the resilience of Jet2's core package holiday business, which constitutes the primary profit driver and continues to exhibit stable demand and modestly increasing prices. This strength effectively offsets incremental softness in the flight-only market, a segment noted to have minimal impact on group earnings. Jefferies projects a 10% compound annual EBIT growth over the next two years, underpinned by moderating cost inflation and efficiency gains from a strong fixed-cost base and new aircraft. While market seat capacity is expanding at a manageable rate (6-7% in FY25), analysts acknowledge potential competitive pressure from carriers like Ryanair. A key sensitivity for investors to note is that a one-percentage-point swing in group opex inflation could impact EBIT by approximately 10%. Jet2's vertically integrated model is a significant competitive advantage, driving exceptional operational performance, including a 61% repeat booking rate and a 0.05% cancellation rate. With a strong balance sheet, projected owned cash of £600-£700 million, and expectations for further shareholder returns in FY27, the company's financial and strategic position appears robust.

Key Decisions for Investors

• Given the dual-broker bullish reaffirmations and a price target implying over 20% upside, investors may consider the recent share price weakness an attractive entry point for a position in Jet2.
• Investors should focus on the performance of the core package holiday segment, as its stable pricing and demand are the key drivers insulating the company's profitability from softness in the less critical flight-only market.
• It is crucial to monitor operating expenditure inflation, as a 1 ppt swing can impact EBIT by approximately 10%, and to watch for any signs of heightened competition eroding package holiday margins.
• The company's strong balance sheet and the potential for enhanced shareholder returns commencing in FY27 suggest that long-term investors may be rewarded for holding the position.