On Wednesday, RBC Capital adjusted its outlook on Ryanair shares, reducing the price target to €24 from €25, while keeping an Outperform rating on the airline's stock.
The adjustment comes as the firm revises its fiscal year 2025 estimates following Ryanair's fiscal year 2024 results, which presented a more conservative view on unit costs and fares than RBC Capital had previously anticipated.
The revised price target reflects a tempered expectation for the airline's financial performance in the near term. Although RBC Capital has lowered its forecast, the firm also factored in the potential impact of share buybacks that go beyond the €700 million Ryanair has announced it will execute over the next six months.
This additional consideration has resulted in a slight increase in RBC Capital's fiscal year 2026 earnings per share (EPS) estimate due to a projected reduction in the number of shares outstanding.
RBC Capital's commentary indicates that while near-term unit costs and fare forecasts have led to a decrease in the price target, the firm remains optimistic about Ryanair's longer-term financial health.
The firm suggests that there is a possibility for shareholder returns to increase significantly by fiscal year 2026, driven by a substantial year-over-year reduction in capital expenditures, which is expected to exceed €1.2 billion.
The airline's forward-looking strategies, including the anticipated share buybacks, are expected to yield a dividend and buyback return of approximately 8% by fiscal year 2026.
This projection is based on Ryanair's current financial trajectory and planned capital expenditure reductions, which could enhance shareholder value over the next few years.
InvestingPro Insights
As investors digest RBC Capital's revised outlook on Ryanair, real-time data and insights from InvestingPro provide additional context for the airline's current financial position and future potential. With a market capitalization of $22.29 billion and a P/E ratio standing at 10.95, Ryanair is trading at a valuation that suggests a balance between its earnings and market expectations. Notably, the company's P/E ratio has been adjusted to 10.62 for the last twelve months as of Q4 2024, indicating a slight improvement in valuation over time.
Ryanair's revenue growth is another highlight, with a 24.77% increase over the last twelve months as of Q4 2024. This robust growth reflects the airline's ability to expand its revenue streams in a competitive industry. Additionally, the company's gross profit margin is healthy at 28.84%, showcasing its capacity to manage costs effectively while generating income.
InvestingPro Tips further enrich the analysis by highlighting that Ryanair holds more cash than debt on its balance sheet, suggesting financial stability and resilience. Moreover, the stock is considered to be in oversold territory according to the Relative Strength Index (RSI), potentially indicating an attractive entry point for investors. It's worth noting that analysts predict the company will be profitable this year, backed by its performance over the last twelve months.
For those considering an investment in Ryanair, InvestingPro offers additional insights and analytics, such as the company's trading at a low P/E ratio relative to near-term earnings growth. Readers interested in a deeper dive into Ryanair's financials can explore further with InvestingPro, which lists 6 more tips for the company. To enhance your investment research, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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