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Ryanair Stock Plunges 18.9% in 6 Months: Should You Buy the Dip?
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Shares of Ryanair Holdings (RYAAY - Free Report) have not had a good time on the bourses of late, declining in double-digits over the past 180 days. The disappointing price performance resulted in RYAAY underperforming its industryin the said time frame. Additionally, RYAAY’s price performance compares unfavorably with that of other airline operators like Alaska Air Group, Inc. (ALK - Free Report) and Southwest Airlines Co. (LUV - Free Report) in the same time frame.
Six-Month Price Comparison
Image Source: Zacks Investment Research
Currently trading at $111.50, the stock rebounded 27.9% from its 52-week low of $87.18 on Oct. 31, 2023. However, it still reflects a significant 26% discount from its 52-week high of $150.73, reached on April 8.
Let’s find out if it’s the right time to buy RYAAY.
Upbeat Air Travel Demand: A Major Tailwind
Passenger volumes have been robust at Ryanair over the past few months owing to the rebound in air-traffic from COVID-19 lows. Driven by the air travel demand strength, RYAAY’s traffic increased 9% year over year during fiscal 2024 (ended March 31, 2024). During first-quarter fiscal 2025, traffic rose 10% year over year despite multiple Boeing (BA - Free Report) delivery delays.
Additionally, RYAAY reported impressive traffic numbers for August 2024. The number of passengers transported on Ryanair flights was 20.5 million in August 2024, reflecting an 8% year-over-year increase. The August load factor (percentage of seats filled by passengers) of 96% remained flat sequentially, as well as on a year-over-year basis.
Notably, RYAAY’s impressive August 2024 traffic numbers reflect improvement at a six-month stretch from March 2024.
To meet the upbeat demand, Ryanair expects its traffic view to grow 8% on a year-over-year basis for fiscal 2025, subject to Boeingdeliveries returning to contracted levels before the year-end.
Some Other Tailwinds Working in Favor of RYAAY Stock
We are impressed with RYAAY’s solid balance sheet. The low-cost carrier’s cash and equivalents increased to $5.15 billion at the end of first-quarter fiscal 2025 from $3.49 billion at the end of fiscal first-quarter 2024 reported figure. Meanwhile, the long-term debt level has decreased to $2.7 billion at the end of first-quarter fiscal 2025 from $3.1 billion at the first quarter of fiscal 2024-end.
RYAAY’s first-quarter fiscal 2025 long-term debt translates into a debt-to-capitalization of 28.4%, which is well below the sub-industry’s 65.7%.
Long-Term Debt to Capitalization
Image Source: Zacks Investment Research
A strong balance enables the company to reward its shareholders with dividend payments and share repurchases. So far, RYAAY has completed more than 50% of the €700m share buyback program, which started in May 2024. On completion, Ryanair will return more than €7.8bn to its shareholders since 2008. A final dividend payment of €0.178 per share will be paid in September 2024.
Last week, Ryanair’s CEO, Michael O’Leary, stated that the downward trend witnessed during summer pertaining to average fares has leveled out. With fears of a double-digit fare decrease subsiding, he expects airfares during the peak summer season to decrease by around 5%. This renewed expectation has boosted the airline’s stock price.
Rising Expenses Weigh on RYAAY Stock
Escalating operating expenses due to high fuel costs, staff costs and higher air traffic control fees are hurting Ryanair’s bottom line. Evidently, total operating costs grew 24% year over year during fiscal 2024, owing to a 32% increase in fuel costs, higher staff costs (including pay restoration, crew, engineering & handler pay rises, higher crewing ratios and pilot productivity pay) and Boeing delivery delays.
During first-quarter fiscal 2025, operating costs rose 11% year over year, owing to higher staff and other costs which was in part due to Boeing delivery delays.
Moreover, events like the anti-trust inquiry, which was faced by Ryanair, along with Wizz Air and easyJet over price-fixing allegations for flights to and from Sicily, are not welcome. This could harm consumer confidence in the company.
Given the headwinds surrounding the stock, earnings estimates have been southbound, as shown below.
Image Source: Zacks Investment Research
To Conclude
Upbeat passenger volumes bode well for RYAAY. However, given the abovementioned headwinds, we believe that it is not advisable to buy the dip in this Zacks Rank #5 (Strong Sell) stock until the company demonstrates substantial improvement in its performance. With declining earnings estimates, the stock is witnessing negative investor sentiments
Image: Bigstock
Ryanair Stock Plunges 18.9% in 6 Months: Should You Buy the Dip?
Shares of Ryanair Holdings (RYAAY - Free Report) have not had a good time on the bourses of late, declining in double-digits over the past 180 days. The disappointing price performance resulted in RYAAY underperforming its industryin the said time frame. Additionally, RYAAY’s price performance compares unfavorably with that of other airline operators like Alaska Air Group, Inc. (ALK - Free Report) and Southwest Airlines Co. (LUV - Free Report) in the same time frame.
Six-Month Price Comparison
Currently trading at $111.50, the stock rebounded 27.9% from its 52-week low of $87.18 on Oct. 31, 2023. However, it still reflects a significant 26% discount from its 52-week high of $150.73, reached on April 8.
Let’s find out if it’s the right time to buy RYAAY.
Upbeat Air Travel Demand: A Major Tailwind
Passenger volumes have been robust at Ryanair over the past few months owing to the rebound in air-traffic from COVID-19 lows. Driven by the air travel demand strength, RYAAY’s traffic increased 9% year over year during fiscal 2024 (ended March 31, 2024). During first-quarter fiscal 2025, traffic rose 10% year over year despite multiple Boeing (BA - Free Report) delivery delays.
Additionally, RYAAY reported impressive traffic numbers for August 2024. The number of passengers transported on Ryanair flights was 20.5 million in August 2024, reflecting an 8% year-over-year increase. The August load factor (percentage of seats filled by passengers) of 96% remained flat sequentially, as well as on a year-over-year basis.
Notably, RYAAY’s impressive August 2024 traffic numbers reflect improvement at a six-month stretch from March 2024.
To meet the upbeat demand, Ryanair expects its traffic view to grow 8% on a year-over-year basis for fiscal 2025, subject to Boeingdeliveries returning to contracted levels before the year-end.
Some Other Tailwinds Working in Favor of RYAAY Stock
We are impressed with RYAAY’s solid balance sheet. The low-cost carrier’s cash and equivalents increased to $5.15 billion at the end of first-quarter fiscal 2025 from $3.49 billion at the end of fiscal first-quarter 2024 reported figure. Meanwhile, the long-term debt level has decreased to $2.7 billion at the end of first-quarter fiscal 2025 from $3.1 billion at the first quarter of fiscal 2024-end.
RYAAY’s first-quarter fiscal 2025 long-term debt translates into a debt-to-capitalization of 28.4%, which is well below the sub-industry’s 65.7%.
Long-Term Debt to Capitalization
Image Source: Zacks Investment Research
A strong balance enables the company to reward its shareholders with dividend payments and share repurchases. So far, RYAAY has completed more than 50% of the €700m share buyback program, which started in May 2024. On completion, Ryanair will return more than €7.8bn to its shareholders since 2008. A final dividend payment of €0.178 per share will be paid in September 2024.
Last week, Ryanair’s CEO, Michael O’Leary, stated that the downward trend witnessed during summer pertaining to average fares has leveled out. With fears of a double-digit fare decrease subsiding, he expects airfares during the peak summer season to decrease by around 5%. This renewed expectation has boosted the airline’s stock price.
Rising Expenses Weigh on RYAAY Stock
Escalating operating expenses due to high fuel costs, staff costs and higher air traffic control fees are hurting Ryanair’s bottom line. Evidently, total operating costs grew 24% year over year during fiscal 2024, owing to a 32% increase in fuel costs, higher staff costs (including pay restoration, crew, engineering & handler pay rises, higher crewing ratios and pilot productivity pay) and Boeing delivery delays.
During first-quarter fiscal 2025, operating costs rose 11% year over year, owing to higher staff and other costs which was in part due to Boeing delivery delays.
Moreover, events like the anti-trust inquiry, which was faced by Ryanair, along with Wizz Air and easyJet over price-fixing allegations for flights to and from Sicily, are not welcome. This could harm consumer confidence in the company.
Given the headwinds surrounding the stock, earnings estimates have been southbound, as shown below.
Image Source: Zacks Investment Research
To Conclude
Upbeat passenger volumes bode well for RYAAY. However, given the abovementioned headwinds, we believe that it is not advisable to buy the dip in this Zacks Rank #5 (Strong Sell) stock until the company demonstrates substantial improvement in its performance. With declining earnings estimates, the stock is witnessing negative investor sentiments
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.