Even though the FTSE 100 is made up of the largest companies by market-cap, it doesn’t mean that all are so mature and large that big share price gains can’t be achieved. In fact, one undervalued stock in the index received a Buy recommendation from a leading bank last week with significant potential to rally.

Getting ready to fly

I’m talking about easyJet (LSE:EZJ). The stock’s down a modest 4% over the past year. The latest full-year results for the period ended September 2025 showed strong performance with revenue up 9% to £10.1bn and pre-tax profit rising 9% to £665m versus 2024. 

Analyst Jarrod Castle from UBS has an updated price target of 800p for the stock over the coming year. Given the current share price is 480p, this reflects almost a 67% move higher. In terms of reasoning, he spoke about how well easyJet Holidays was doing and how the division could help to continue to drive profitability.

Castle expects the unit to achieve a £450m profit target by 2030. If an investor shares this optimism, it’s logical to see why the share price could soar.

It’s worth noting that not everyone shares the enthusiasm of the team at UBS. Analysts at Deutsche Bank just cut its easyJet target from 535p to 465p, believing there are better airlines in the sector to consider buying. This shows that all forecasts need to be taken with a pinch of salt. They’re subjective, so shouldn’t be solely relied on for making investment decisions.

Adding in my view

With a price-to-earnings ratio of 7.28, I do think easyJet stock’s undervalued right now. It’s below the benchmark figure of 10 I use to assign a fair value.

I do get the concern around a softer macroeconomic environment. This could cause people to cut back on some travel plans, and is a risk for easyJet going forward. However, I think some of this caution’s misplaced. I think people will reduce long-haul plans. But easyJet’s a direct beneficiary of intra-Europe travel, not long-haul. Therefore, I think it should see good demand and not be unduly impacted.

I agree with UBS about the holidays division. It’s underappreciated by some investors. The area delivers stable cash flows and good profit margins. As this segment grows, the company looks less like a pure airline and more like a travel platform, which could be argued to mean the stock deserves a higher valuation.

Finally, the stock looks attractive due to the continued balance sheet improvements post-pandemic. Debt’s coming down, and cash generation’s improving. This should help investors feel more comfortable considering the stock for their portfolios. Although I don’t have an exact price target for the company, I don’t think the UBS tip’s unrealistic.