Numis lowers Easyjet recommendation on "near-term uncertainty"

13th May 2015 09:59

Numis Securities has lowered its recommendation for budget airline Easyjet from 'buy' to 'add' on the back of "near-term uncertainty".Easyjet's share price dropped nearly 10% on Tuesday after the company disappointed with a cautious outlook, saying air traffic control strikes in France and currency movements will weigh on full-year results.Numis cut its profit forecasts but admitted the shares were "treated rather brutally"."We are trimming earnings expectations modestly (again) today following a closer look at the numbers, but we believe that the underlying investment case remains intact," the broker said.Numis said Easyjet is well placed to drive further strong growth due to its network quality, opportunity to take market share from legacy carriers, increased business traffic and further cost savings.The broker said: "The lower oil price is encouraging some new capacity into the market, and encouraging inefficient capacity to stick around, which means that revenue per seat (RPS) growth expectations are being tempered."However, we do not see a dramatic change in the supply demand/equilibrium and we have not made material changes to our RPS assumptions."Numis cut its target price from 2,100p to 1,850p for the stock, which was down 0.1% at 1,652.63p by 10:16.