Will Ryanair Stock Gains, Strong Estimates Help it Fly?

Key Points

• Ireland's Ryanair posted impressive price gains in October and may be climbing out of a base.
  
• Ryanair's CEO forecasts a strong rebound in travel. Other airlines provided strong outlooks for Q4 travel.
• Analysts have a "moderate buy" rating on the stock, with a price target of $104.50, an upside of 53.99%.

Professional investors are always on the lookout for stocks that can be scooped up at low valuations. In an industry recovering from pandemic lows, Ireland-based Ryanair Holdings NASDAQ: RYAAY shows signs of institutional buying with a one-month gain of 11.17%. The stock attempts to fly above a year-to-date decline of 34.26%.

The company operates as a discount European airline. It’s based in Dublin and flies routes in its home country, the U.K., the European continent and a few cities in North Africa. 

The stock has also posted an impressive one-week gain of 7.39%. Shares closed Thursday at $67.77, up $0.50, or 0.74%. Trading volume was 14% higher than average.

Forecasts for airline stocks show much clearer skies than in the past two years. Companies such as Germany’s Lufthansa, Southwest Airlines NYSE: LUV and American Airlines Group NASDAQ: AAL provide strong outlooks for fourth-quarter travel. 

The U.S. Transportation Security Administration (yes, those folks who make you take your shoes off) said on October 17 that it screened 2.49 million air passengers the previous day. That was the highest level since February 2020.

The best price performer within the airline industry in is United Airlines Holdings NASDAQ: UAL, which is up 32% so far in October. Panama-based Copa Holdings NYSE: CPA is also a standout, with a gain of 11% this month.  

Ryanair CEO Michael O’Leary told Reuters earlier this month that bookings at the airline for both the autumn and holiday travel season were tracking ahead of pre-COVID-19 levels, despite fare increases. 

He added that demand may be linked to increased pandemic savings rates. However, inflation and increased energy costs for northern European consumers may put a dent in consumers' willingness to travel.

Revenue Growth Rebound  

Aaron Dessen, a certified financial planner at Payne Capital Management, tells MarketBeat that he’s been eyeing Ryanair’s strong revenue growth. Revenue increased between 68% and 837% in the past five quarters. Ryanair has forecasted an additional 97 million passengers in 2023. 

Dessen points out that Ryanair took the step of hedging fuel costs until early next year, which helps it withstand cost increases. It took a big risk by retaining most employees during pandemic slowdowns but it’s reaping the benefits of full staffing while other airlines struggle to maintain full schedules with reduced workforces.

“It has saved them a lot of headaches and costs coming out of the pandemic because they’re able take that increase in demand and traffic in stride,” Dessen says. 

It also prevents public relations nightmares that many U.S. airlines endured over the summer when passengers took to social media to complain about canceled flights. 

Analysts See Return to Profitability

This may surprise you: Within the airline industry, Ryanair has the third-largest market capitalization behind Delta Airlines NYSE: DAL and Southwest. Ryanair’s market cap is $15.28 billion, putting it at the lower end of the large-cap category. 

Analysts see the company rebounding to profitability for the full year, fiscal 2023. Wall Street expects net income of $6.42 per share. That would be up from losses in fiscal 2021 and 2022. Fiscal 2021, which included the bulk of pandemic slowdowns, saw a loss of $5.36 per share, its first in years. That narrowed to a loss of $0.75 per share in fiscal 2022.

In fiscal 2024, analyts expect Ryanair to earn $6.17 per share, which would be down slightly from the current year but still higher than pre-pandemic levels. 

MarketBeat analyst data for Ryanair show a “moderate buy” rating on the stock, with a price target of $104.50, a potential upside of 53.99%. 

Does that mean it’s time to buy? Like many stocks right now, Ryanair’s longer-term 200-day average is above its 50-day. That’s not uncommon. As the stock rallies, that situation will eventually reverse itself. It’s understandable to want to get in on a stock early, especially when analysts see strong upside potential. 

However, with the broader market still burdened by uncertainty and the stock’s own moving averages signaling continued weakness, you may consider waiting for a better rally to take hold.