Stifel recommended investing in the brand after Jet2.com and Jet2holidays on Thursday (24 November) returned to profitability in the six months to the end of September 2022.
These “confirmed a strong rebound in summer 2022”, Stifel said, with pre-tax profit up 44% on pre-pandemic levels to £505 million. “Jet2 remains our top pick in the travel space,” it said, adding the stock market was “underestimating the company’s strong business model” and near £2 billion cash pile.
Stifel said it expected Jet2 “to deliver multi-year profitable market share gains, whatever the path of the economy”. It added: “In particular, we see Jet2 as best placed to capitalise on industry consolidation such as from the demise of Thomas Cook, where our analysis suggests 11 of Thomas Cook’s top 12 airports/cities overlap with Jet2’s top 12.”
Stifel praised the brand’s business practice during the pandemic. “The business model has proven resilient, with positive recognition for managing customer expectations, cancellations and refunds.”
Stifel said Atol data suggests Jet2 is now joint market leader with Tui in the UK with 20% share. Jet2’s market share had increased from 15% in 2019, while Tui’s had fallen from 22%, it said.
The bank predicted full year profit before tax of £310 million, helped by better interest on cash deposits. It added: “Forward bookings do not indicate a softening of consumer demand, but well documented cost/margin headwinds are flagged.”
Analysts at another investment bank, Jeffries, said: “Jet2 has brand perception, operational flex and balance sheet to win share, with a potential tailwind from regulatory reform, in our view.”
It also recommended the shares and said the operator’s recent order for 35 new Airbus A320 and A321 aircraft, with options to take up to 71, “should underpin growth”. In total, Jet2 has 98 Airbus A320neo family aircraft on firm order, with options on a further 48.
Speaking to TTG at the recent Jet2holidays conference, chief executive Steve Heapy said he was hopeful the group would take up most – if not all – of those options.
Jeffries noted the operator had described winter 22/23 bookings as "encouraging" with "continued robust pricing". “The company now expects full year profit before tax to exceed consensus of £283 million. We raise our forecast to £307 million,” it concluded.
