Growth postponed at Jet2, but Panmure Liberum stays optimistic

(Sharecast News) - Panmure Liberum has reiterated a 'buy' call on Jet2 despite predictions that the budget airline will take three years to return to earnings growth. The company has a strong track record of growth, but short-term earnings improvements have been traded for the "expensive" move to launch a new base at Gatwick from next summer, the broker said.

Analyst Gerald Khoo said Jet2's operating profit is predicted to be flat over the current fiscal year ending March 2026, and decline in FY27, before growing in FY28 - with potential future share buybacks providing scope for further EPS growth.

"This lack of short-term earnings growth reflects the tough comparative provided by recent success, a more challenging trading environment this year, and the costs associated with the Gatwick base launch, with management not expecting this operation to be profitable until FY29E," Khoo said.

"The long-term fundamentals remain attractive, but the Gatwick move brings risks as well as potential rewards, and costs in terms of mobilisation spend, startup losses, and the postponement of earnings growth."

Khoo said that Jet2's valuation - the stock trades at just 6.4 times current-year earnings - remains highly attractive, but "patience [is] required".

The broker has a 1,700p target price for the shares, which were up 0.8% at 1,329p by 1407 GMT.