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(Sharecast News) - EasyJet was downgraded on Tuesday by both Citi and RBC Capital Markets, after the budget airline rejected a fourth, 4.9bn approach from US suitor Castlelake last week but agreed to enter discussions.
Citi downgraded easyJet to 'neutral' from 'buy' but lifted the price target to 580p from 500p. It noted that the easing of war concerns and interest from Castlelake have seen the shares rise 75% since their mid-May lows.
"Completion of a takeover could offer another 20- 25%, though this alone is not enough to be buyers when considering the outstanding impediments to completion," the bank said. "At the same time, we see no further upside from the carrier's own turnaround plan after the recent rally, while current trading continues to sound challenging for summer."
RBC Capital Markets downgraded the shares to 'sector perform' from 'outperform' but hiked the price target to 600p from 405p.
It said the shares have increased by circa 44% since the Castlelake-led approach became public, outperforming most peers by more than 30% in this period. "In a takeover scenario, we think there could be further upside beyond the previous offer of 650p/share," it said.
"However, we think there could be more than 20% near-term downside potential in the absence of a takeover."
RBC said the risk-reward appears balanced at the current share price.
At 1040 BST, the shares were down 0.8% at 577.40p.
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