Banks downgrade easyJet, BA and Ryanair
10.05.08
The persistent strength of the price of oil, which passed $126 per barrel yesterday, saw banks downgrade the shares of easyJet, British Airways and Ryanair. BA's shares were down 10.25p to 228.25p, easyJet closed down 15p at 285p and Ryanair fell 11c to €2.89.
Cazenove analysts revised their rating on BA's stock to ‘underperform’ from ‘in-line’, saying ‘Until there is some respite from the relentless rise in the price of oil and / or some greater investor confidence in the outlook for demand, we believe that the sector will struggle to outperform on a six-month view.'
The investment bank added that easyJet, which it moved to ‘in-line’ from ‘outperform’, remains its ‘favoured pick in the sector’. However, it said: ‘For the time being, share price performance is in thrall to the oil price and to a general sense that the resilience of forward books must eventually weaken in the face of a slowdown in economic growth in the UK and, eventually, Europe.’
Fellow investment bank Merrill Lynch cut its targets for Ryanair, easyJet and BA, citing prevailing oil prices. Merrill analysts Samantha Gleave and Paul Butler cut Ryanair's forecasts by 7.3%, adding: ‘Over the long term, we believe Ryanair can create value. However, in the nearer term, share-price volatility may continue reflecting short-term macro-related concerns, market sentiment and fuel-price movements.' The bank retains a ‘buy’ recommendation on Ryanair and a ‘neutral’ recommendation on easyJet and BA.
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