Davy slashes Ryanair share outlook but still upbeat on airline’s prospects
RYANAIR’S own stockbroker, Davy, has slashed its price target for the airline’s shares to €14 from €18, but has maintained its ‘outperform’ rating on the stock, insisting the carrier is “well-placed” to take advantage of rivals’ difficulties and capacity cuts.
The upbeat assessment comes just a week after Ryanair issued a profit warning that saw its shares plunge.
The airline expects its fullyear profit in the current financial year that ends next March to be 12pc lower than originally expected and that it will now probably come in at between €1.1bn and €1.2bn.
It also cut its expected passenger number tally for the financial year to 138 million from 139 million.
Davy Stockbrokers pointed out that the current year’s figure still represents 6pc growth.
“With a historical lag of 12-15 months, we should see capacity growth slowing as hedges roll off and fuel prices hurt the sector — all the other airlines in the sector have lower margins than Ryanair,” noted Davy Stockbrokers.
“We have only started to see market capacity cuts, but these will accelerate. Europe’s niche airlines have had a difficult summer — Primera Air, Small Planet, VLM, Azur Air Germany and SkyWork have all ceased operations. We expect more casualties from rising fuel prices and overcapacity unless there is consolidation.”
Ryanair CEO Michael O’Leary has also predicted that high fuel costs will see smaller rivals go out of business.
Ryanair has been hit by a number of strikes in the past few months. Shares in the airline were trading at under €12 early yesterday, having risen 13 cent. They have fallen about 35pc in the past year.