JP Morgan is bearish on EasyJet share price: should you?

EasyJet (LON: EZJ) share price rose for the second straight day on Thursday even after it received a sell rating from JP Morgan’s David Perry. The stock rose to a high of 370p, which was the highest point since December 13. It has risen by more than 34% from the lowest level in 2022.

JP Morgan downgrades EasyJet

EasyJet share price has made a slow comeback even after it received mixed ratings from City analysts. In a statement on Wednesday, David Perry, an analyst at JP Morgan, downgraded the stock to 320p, implying a 5% strong downside from the current 370p. The analyst warned that the company could struggle from slow growth of European travel in the first few months of the year. 

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JP Morgan is not the only City bank bearish on EasyJet. In December, Andy Chu from Deutsche Bank, downgraded the stock to 330p. He cited the company’s limited upside and elevated costs in the coming months. In November, Barclays analysts downgraded the stock to 250p. 

On the other hand, highly-rated analysts from UBS and Bernstein sounded optimistic about the stock. They expect that the low-cost airline could see its share price almost double in the medium term to about 600p. 

Which analysts are right?

So, which analysts are right on the EasyJet stock price? EasyJet has done well in the past few months even as jet fuel prices remained at an elevated level. The company had an EBIT profit of 3 billion pounds in its financial year after making a loss of over 1 billion pounds. It also narrowed its headline loss to 178 million pounds from the previous 1.1 billion pounds. 

The company also has one of the best balance sheets in European aviation. It has a net debt position of 0.7 billion pounds, as I wrote here. It has over 3.6 billion in cash and short-term investments and unrestricted access to 4.7 billion pounds.

Also, it has limited exposure to eastern Europe. And with inflation easing, there is a likelihood that it will see more demand in 2023. While investing in airlines is always futile, I think that EasyJet could see a strong performance in 2023.

EasyJet share price forecast

The daily chart shows that the EZJ share price has risen in the past two straight days. It remains above last year’s low of 276p and has moved slightly above the 50-day moving average. The Relative Strength Index (RSI) has moved above the neutral point of 50. It is also approaching the important resistance point at 428p. 

Therefore, while a major recession could affect the company, I suspect that the shares will continue rising, with the next key target being at 450p. The bullish view will be invalidated if the stock moves below the support at 276p.