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Ryanair analysts cut price targets but keep the faith

Valuation remains unchallenging while buyback and dividend convert to 6% yield for shareholders

Higher expected costs at Ryanair prompted analysts to cut forecasts although each continues to maintain 'buy' or 'outperform' ratings. Photograph: Toms Kalnins/EPA
Higher expected costs at Ryanair prompted analysts to cut forecasts although each continues to maintain 'buy' or 'outperform' ratings. Photograph: Toms Kalnins/EPA
Proinsias O'Mahony
Tue May 28 2024 - 06:00

Ryanair shares have been weak lately, with the company confirming expectations of weaker summer pricing on its latest earnings call.

Despite reporting a 34 per cent profit increase to €1.92 billion, Ryanair’s outlook was overshadowed by rising operating costs, as well as what Michael O’Leary described as a “recessionary feel around Europe” that was impacting ticketing demand.

Higher expected costs prompted Bank of America (BofA) to cut its 2025 net income estimate by 13 per cent, to €2.2 billion. BofA cut its price target for the shares, as did UBS, RBC Capital, and Goldman Sachs, although each continues to maintain “buy” or “outperform” ratings.

Now, analyst buy ratings aren’t exactly a rarity, but it’s fair to say Ryanair’s fundamentals still look healthy. The announcement of a €700 million share buyback alongside a €480 million dividend translates to a buyback and dividend yield of around 6 per cent to shareholders, notes BofA. RBC expects a buyback and dividend return of around 8 per cent by 2026.

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Meanwhile, valuation remains unchallenging, says BofA, with shares trading at just 9.3 times 2025′s estimated earnings – “significantly below” its historical average of 13.

Proinsias O'Mahony

Proinsias O'Mahony

Proinsias O’Mahony, a contributor to The Irish Times, writes the weekly Stocktake column