LONDON (ShareCast) - High oil prices and weakening consumer confidence prompted ABN Amro to lower its recommendations on budget airlines easyJet and Ryanair to ‘hold’ from ‘buy’.
The broker now assumes oil prices of $120 a barrel, compared with $90 previously.
However, ABN Amro said that the best time for long-term investors to buy into airlines is when things look bleakest, possibly when the revenue outlook weakens.
It slashes its target price on easyJet to 300p from 670p and on Ryanair to €2.80 from €4.70.
Dresdner Kleinwort has cut its rating on Diageo, the drinks giant behind brands including Smirnoff and Baileys, to ‘hold’ from ‘add’ saying it sees signs of reduced consumer spending in the US.
The broker cut its price target on Diageo to 1,050p from 1,165p.
Among the evidence it cited for weakening US consumer confidence was coffee giant Starbucks’ warning yesterday that consumers were being impacted by the effects of the housing market downturn. It pointed out that the US accounts for a third of Diageo’s earnings before interest and tax
Dresdner cut its growth expectations on the company’s US operations for the year to June 2009 to 1.3% from 2.6%.
JP Morgan has cut its price target on Lonmin to 3,590p from 3,800p, describing the miner’s recent production results as “poor”.
It noted that Lonmin, which mines for platinum in South Africa, saw production of the precious metal hit by power supply disruptions, safety stoppages and absenteeism.
The broker, which keeps its ‘neutral’ rating on the company, says it doubts Lonmin will reach the sales targets it has set for the year to September.
JPM said it had “grave misgivings about the direction of Lonmin”, including concerns that widespread mechanisation will lead to ore dilution and therefore lower production. It also questioned the rationale of London-headquartered Lonmin basing executive management 6,000 miles away from what it sees as the company’s only likely asset base.
€ 0.01
