Three weeks of turbulence, but no nosedive for Ryanair’s stock
AFTER a terrible three weeks for Ryanair – capped off with news yesterday that it is extending thousands of flight cancellations until March – you might expect its share price to nosedive.
But they closed only a modest 0.67pc lower yesterday and are less than 10pc down on their level before the fiasco first emerged in mid-september.
That’s because messing up the travel plans of some 715,000 passengers is only expected to dent its profits by around €60m (£53m) in compensation costs, according to Michael Hewson, an analyst at CMC Markets UK.
“Despite its name and brand being synonymous with poor customer service, the company last year posted profits in excess of €1bn,” Mr Hewson said.
“Despite the shambles of recent days, it still looks on course to post similar profits this year.”
UK shares ended Friday in positive territory, with the FTSE 100 up 49.94 points at 7,372.76, led by ITV, up 3.6pc, as it was buoyed by an upgrade to “overweight” from Barclays.
Barclays analyst Julien Roch said the broadcaster could still increase earnings per share by up to 9pc annually even if its core business does not grow and despite a fall in television watching by young adults.
Mr Roch raised his target price for the stock to 200p from 190p, implying an 19pc jump on the previous day’s close in a boost to incoming chief executive Carolyn Mccall, who joins from easyjet in January. Fellow FTSE 100 member
Antofagasta, the Chilean copper mining group, was also lifted on an upgrade from an analyst, Investec’s Marc Elliott.
Mr Elliott is bucking his peers, the sell-to-buy ratio of analyst recommendations before trading yesterday 12 to five, with nine holds. His recommendation sent Antofagasta’s stock up 2.22pc to £9.49.
The blue-chip index as a whole was boosted by a fall in the value of the pound, which weakened on poor economic data from the Office for National Statistics. The body revised down its estimate for growth for the third quarter to 1.5pc, down from 1.7pc. Meanwhile, the UK service sector contracted 0.2pc in July.
Sterling was down 0.3pc against the dollar to $1.3395 and was 0.5pc lower against the euro at €1.1344.
In the wider FTSE 350, defence contractor Qinetiq was one of the notable gainers, up almost 6pc to £2.47. The company reported a recovery in orders in Europe, the Middle East and Africa after disappointing numbers in the first quarter of the year had spooked investors.
Analysts David Perry and Malini Chauhan at JP Morgan said in a note that the company’s valuation was attractive after the stock’s weakness since July.
Qinetiq is the cheapest European defence stock on an enterprise value to underlying profit basis, according to Bloomberg.
By far the biggest faller of the day was Carillion, plunging 20.2pc on top of already eye-watering falls this summer. The latest slide came after a further £200m of writedowns and a £1.15bn pre-tax half-year loss.