Broker tips: EasyJet, Rolls-Royce, Direct Line, Admiral

RBC Capital Markets hiked its price target on easyJet to 540p from 500p on Thursday and lifted estimates after the budget airline’s first-quarter update a day earlier.

The bank upped its EBITDAR estimates by around 9% in the next two financial years and by 6% in 2025/26E. It also lifted its 2023/24 pre-tax profit forecast by £87m to £602m, which is ahead of consensus of £558m.

By 2025/26, RBC forecasts pre-tax profit of £722m, which is modestly ahead of Eikon consensus of £709m, although below easyJet's medium-term ambition for pre-tax profit of more than £1bn.

Analysts at Berenberg kept their recommendation for shares of engineer Rolls Royce at 'sell' following its analysis of current positioning in the company's shares among long-only and hedge fund investors.

The latter, in particular, were "very crowded" and long the shares, but had "little to no interest" in taking profits at present, Berenberg said.

Long-only investors on the other hand were "assumed" to be underweight the shares, so if they shifted their stance that might drive further share price gains.

"However, putting near-term tactics to one side, we would argue the positives are in the price and assume enthusiasm wanes as tangible catalysts crystalise next month, noting we have found very limited interest from prospective long-only buyers," they said.

Shares in UK motor insurers Direct Line Group and Admiral were rising on Thursday after positive comments from JPMorgan, which said that a sector recovery is imminent and that investor concerns about regulatory intervention are overdone.

The bank resumed coverage of DLG with an 'overweight' rating, having previously been rated 'neutral', and upgraded its stance on Admiral from 'underweight' to 'neutral'.

JPMorgan said that 2022/23 results across the sector were the worst since the financial crisis, as market pricing hadn't caught up with claims inflation which increased more than of recent norms due to underlying economic inflation and supply chain issues.

"At this stage, with pricing holding firm, we expect that on a written basis, pricing has increased sufficiently to meet future claims costs with results from 2H24 onwards likely to show material improvements before we see a 'clean' year of earnings in 2025," JPMorgan said.