UBS and Liberum Capital have both trimmed their target prices for Ryanair Holdings PLC (LON:RYA) after the budget carrier last week forecast “broadly flat” 2020 profits with its full-year 2019 results.
In a note, the Swiss bank cut its target price for the Irish airline to €14.45 from €15.25, saying the 2020 guidance was “weaker” than they had predicted, although its analysts were cautiously optimistic that bookings for the upcoming summer season would show stronger year-on-year pricing trends than further out bookings.
The UBS analysts retained their ‘buy’ rating on Ryanair as they expect an improvement in the fare environment over the summer due to the likelihood of increased demand, which they said had previously been the weak point.
Meanwhile, analysts at Liberum also got their scissors out, cutting their target price to €12.5 from €14.5 on the back of the Irish carrier’s flat profit forecasts.
However, like UBS, Liberum's analysts retained a ‘buy’ rating on the stock, saying Ryanair’s long-term fundamentals remained “intact and attractive”, citing a low cost base, market leadership, a robust balance sheet and strong cash generation.
Liberum’s analysts also noted that the short-term headwinds facing the airline sector -- notably softer demand, high fuel prices and Brexit uncertainty -- could serve to constrain or remove weaker competitors, which would improve the long-term outlook for bigger players like Ryanair as the market consolidated.
In the results for its 2019 financial year. published last week, Ryanair saw its profit after tax fall by 29% to €1.02bn, while revenues rose 6% to €7.6bn.
The slump was blamed on lower average fares, which fell by 6% to €37 over the year, as well as higher oil prices adding €440mln to the company’s fuel bill.
Ryanair also said it was “cautious” on pricing going into its new financial year and predicted “broadly flat” profits for 2020.
The airline added that the guidance was heavily dependent on the total of peak summer fares, second half pricing, an absence of security events and “no negative Brexit developments”.
In late-morning trading on Wednesday, Ryanair shares were down 2.4% at €10.4.