Key Takeaways
UBS slashed its 2026 profit before tax forecast for easyJet PLC (LSE:EZJ) by 53 percent, flagging concerns that the airline is sacrificing profitability to defend its market share.
In a note to clients, UBS analysts argued that easyJet's decision to stimulate demand with lower fares rather than cut capacity is a strategic misstep in the face of rising costs.
The bank lowered its price target to 635p from 700p. The downgrade follows several negative surprises from easyJet's latest trading update, including third-quarter pricing running below the prior year, an unforeseen £30 million legal provision, and rigid capacity guidance.
The sharp revision highlights the pressure on easyJet's margins as it navigates cost inflation, particularly from fuel, and legal challenges. UBS believes capacity cuts are necessary to restore pricing power and protect profitability.
The analyst note suggests that while retaining a 'buy' rating, conviction is being tested by the airline's current strategy. The focus on market share over profitability may lead to further estimate revisions if pricing power does not improve. Investors will be closely watching easyJet's next trading update for any change in its capacity strategy and its impact on revenue per seat, a key industry metric.
This article is for informational purposes only and does not constitute investment advice.
