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  • Earnings

Can Ryanair’s share price take off next summer?

Can Ryanair’s share price take off next summer?

Ryanair’s [RYA] share price proved resilient in morning trading following its first-half results, despite recording a loss and stoking fears of worse to come in the second half of the year. In the six months to the end of September, Ryanair saw a net loss of €197m as COVID-19 restrictions weighed on earnings. Ryanair’s share price was particularly threatened by the fact the summer period is usually the busiest for the airline, which saw a €1.15bn profit for the same period last year. Ryanair said 99% of its fleet remained grounded between mid-March and the end of June, with revenue coming in at €1.18bn, down a steep 78% on last year. The airline now expects to record even higher losses in the second half of the year as travel restrictions come into place across Europe.

Ryanair’s share price was trading 7.43% up on the day by 1pm on Monday. Since the start of the year, Ryanair’s stock has dropped over 16.68% as the outlook remains bleak for airlines. That said, Ryanair’s share price could be good value for bargain hunters, assuming passengers return next summer.

 

 

What does a second lockdown mean for Ryanair’s share price?

The bulk of Ryanair’s first half revenues were made in the second quarter, when travel restrictions had eased. With the UK’s second lockdown banning international travel, except for business purposes, Ryanair’s share price is in for some turbulence in the second half of the year. In Ireland, which is currently in its second lockdown already, Ryanair has stopped all regional services, blaming government ‘mismanagement’. 

Ryanair had already warned of a 64% decline in passenger numbers in September. That month saw 5.1 million passengers take to the skies with the low-cost carrier, down from the 14.1 million passengers seen in the same month last year. For September, its 12-month annual rolling passenger numbers were 79.9m, down a huge 47% from the previous year. 

 

64%

YoY decline in Ryanair passengers in September 2020

 

 

Overall, traffic fell from 86m passengers to 17m for the first half of the year. In the results, Ryanair stuck with its forecast of 38m passengers for full year 2021. However, the airline warned that figure could be “further revised downwards if EU Govts continue to mismanage air travel and impose more uncoordinated travel restrictions or lockdowns this winter.” 

 

Where next for Ryanair’s share price?

Ryanair’s share price suffered from its stark first half results, but its strong balance sheet was something of a silver lining. The airline has €4.5bn in cash, which it will need to get through the winter. Ryanair is optimistic that its strong balance sheet and ability to fund low fares will put it in a better position after the COVID-19 crisis. That means Ryanair’s share price as it currently stands could be a bargain, although that will depend on passengers coming back next summer.

“We’re starting to worry that this second wave may not be the last though. The airlines need a big summer in 2021, and if that’s prevented by a third wave, some names in the sector will struggle to survive,” wrote Nicholas Hyett, Equity Analyst at Hargreaves Lansdown last week.

Among the analysts tracking the stock on the Financial Times, Ryanair’s share price has an average €13.50 price target. Hitting this would represent an 8.52% upside on the current share price (as of 02 November’s close). Of the 23 offering recommendations, four rate it a Buy and 12 Overperform.

 

Market cap €13.993bn
Operating margin (TTM) -7.89%
EPS (TTM) -0.83
Quarterly revenue growth (YoY) -65.80%

Ryanair's share price vitals, Yahoo Finance, 03 November 2020

 

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