Shares of Ryanair Holdings RYAAY have not had a good time on the bourses of late, declining in double-digits over the past year. The disappointing price performance resulted in RYAAY underperforming its industryin the said time frame. Additionally, RYAAY’s price performance compares unfavorably with that of other airline operators like Alaska Air Group, Inc. (ALK) and Allegiant Travel Company (ALGT) in the same timeframe.
One-Year Price Comparison
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Given the significant pullback in RYAAY’s shares currently, investors might be tempted to snap up the stock. But is this the right time to buy RYAAY? Let’s find out.
Upbeat Air Travel Demand & Fleet Additions Aid RYAAY
Passenger volume has been robust at Ryanair following the end of the pandemic and normalization of economic activities. With travel bookings rising across the industry, passenger revenues at Ryanair are also increasing. Because of this air-travel demand strength, RYAAY's traffic grew 9% year over year despite multiple Boeing BA delivery delays during the first nine months of fiscal 2025. Given this encouraging backdrop, Ryanair expects its fiscal 2025 traffic to reach almost 200 million (+9%) passengers, subject to no further adverse news on Boeing delivery delays. This marks an improvement from the prior view of reaching 198-200 million passengers (+8%).
Ryanair’s fleet-modernization initiatives to cater to the improvement in travel demand are encouraging. The inclusion of modern planes in its fleet and the retirement of the old ones aligns with its environmentally-friendly approach. The new inclusions, apart from having all basic amenities, should result in improved fuel efficiency. By Dec. 31, 2024, 172 of the 210 Boeing 737-8200 aircraft (to be purchased under the 2014 contract) had been delivered. The remaining aircraft are expected to be delivered before March 2026. In May 2023, 300 new Boeing 737-MAX-10 aircraft orders were placed for delivery between 2027 and 2033. Ryanair expects these fuel-efficient MAX jets to generate substantial growth.
Some Other Tailwinds Working in Favor of RYAAY Stock
RYAAY has a solid balance sheet. The low-cost carrier ended third-quarter fiscal 2025 with cash and cash equivalents of $3.31 billion, much higher than the current debt level of $905 million. This implies that the company has sufficient cash to meet its current debt obligations.
Meanwhile, long-term debt level has decreased to $1.79 billion at the end of third-quarter fiscal 2025 from $2.72 billion at third-quarter fiscal 2024-end. RYAAY's efforts to repay its debts are encouraging too.
Concurrent with the earnings announcement for the third quarter of fiscal 2025 (ended Dec. 31, 2024), RYAAY announced it is gearing up to repay a maturing €850 million bond from internal cash resources in September 2025.
Long-Term Debt to Capitalization
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A strong balance sheet enables the company to reward shareholders with dividends and share repurchases. A final dividend of €0.178 per share was paid in September 2024, and an interim dividend of €0.223 per share will be paid on Feb. 26, 2025.
RYAAY is also active on the share buyback front. Restarted in May 2024, RYAAY bought back €700 million worth of shares by August 2024. Concurrent with RYAAY’s earnings announcement for the third quarter of fiscal 2025 (ended Dec. 31, 2024), RYAAY announced that it has completed more than 50% of its current €800m buyback program and is on track to complete this program by mid-2025. On completion, Ryanair will have returned almost €9 billion (including dividends) to shareholders since 2008, with approximately 36% of the issued share capital repurchased and canceled.
Impressive Valuation Picture for RYAAY Stock
From a valuation perspective, RYAAY is trading at a discount compared to the industry, going by its enterprise value to its total sales ratio (trailing 12 months). The reading is also below its five-year median. The company has a Value Score of B.
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Risks Weighing on RYAAY Stock
Production delays at Boeing have been hurting the fleet-related plans of most airline companies, and it is no different for RYAAY. RYAAY is actively in talks with Boeing leadership to speed up aircraft deliveries and has also visited Seattle at the beginning of January. Although B737 production is recovering from Boeing’s strike in late 2024, it is still slow to deliver sufficient aircraft ahead of the summer season of fiscal 2025.
RYAAY anticipates nine deliveries before the summer season of fiscal 2025, while the remaining 29 Gamechangers of the 210 orderbook are likely to be delivered before March 2026. Additionally, Boeing expects the MAX-10 to be certified in late 2025, followed by the delivery of the first 15 MAX-10s in spring 2027. Given that the risk of delivery delays persists, it has prompted Ryanair to lower its fiscal 2026 traffic growth target from an initial 215 million passengers to 210 million passengers, and now it has been reduced to 206 million passengers.
Escalating operating expenses due to high staff costs and higher air traffic control fees are hurting Ryanair’s bottom line. During the first nine months of fiscal 2025, staff costs increased 18% year over year due to the larger fleet, higher sectors and Boeing delivery delays (leading to higher crewing ratios, and the annualization of crew productivity pay increases). Airport and handling charges rose 13% year over year owing to traffic growth, higher landing, ground air traffic control and handling rates. As a result, total operating expenses rose 8% year over year during the first nine months of fiscal 2025. High costs naturally put pressure on margins.
How Should Investors Approach RYAAY Stock?
It is understood that RYAAY stock is attractively valued, and upbeat passenger volumes are contributing to RYAAY’s top line. RYAAY’s measures to expand its fleet, to cater to the rising travel demand, look encouraging. A solid balance sheet allows RYAAY to reward its shareholders in the form of share buybacks and dividend payments.
Despite the positives, we advise investors not to buy RYAAY now due to the production delays at Boeing which have been hurting the fleet-related plans of the company. Escalating operating expenses due to high staff costs and higher air traffic control fees are weighing on the bottom line. We advise investors to wait for a better entry point. For those who already own the stock, it will be prudent to stay invested. The company’s current Zacks Rank #3 (Hold) justifies our analysis.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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