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JPMorgan upgrades IAG; reiterates bullish stance on low-cost carriers

Michele Maatouk

LONDON (ShareCast) - (ShareCast News) - JPMorgan Cazenove upgraded International Consolidated Airlines Group to 'overweight' from 'neutral' and lifted its price target to €9.55 from €8.50. JPM highlighted IAG's potential to expand profitability beyond the 1-2% unit cost savings discounted in the bank's medium-term estimates.

The bank also noted lower susceptibility to the competitive threats faced by its legacy peers and successful inorganic growth and valuation.

JPM's target price on IAG implies 21% upside potential.

The bank said it remains positively biased towards the higher-growth, lost-cost carriers Ryanair , EasyJet (Other OTC: EJTTF - news) and Wizz , all rated 'overweight', versus the strategically-challenged Air France-KLM (Other OTC: AFLYY - news) and Lufthansa , both rated 'underweight'.

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As far as the low-cost carriers are concerned, JPM said it expects to see ongoing exploitation of a lower-cost model to deliver outsized growth, the delivery of incremental efficiencies and targeted expansion in faster growing markets.

At 1106 BST, IAG shares were up 2.8% at 596p.