Ryanair share price looks forward to a strong summer

[MongiIG]

Post-earnings fundamental and technical analysis on Ryanair and its share price.

Source: Bloomberg

 

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 Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Wednesday 24 May 2023 

Ryanair looks forward to a strong summer

Record earnings for its financial year have supported Ryanair Holdings PLC (LSE) shares this week, and while a strong summer of trading is expected some caution remains regarding the winter.

Pre-tax profit of €1.43 billion was slightly better than expected, and traffic growth for the current year is expected to hit 10%. Like easyJet, Ryanair struck a note of confidence regarding consumer spending on airline fares despite the ongoing cost of living crisis.

For the airline industry, it looks like the long recovery from Covid is finally complete. Ryanair expects flight numbers to exceed pre-pandemic levels by 25%, though beyond that it remains cautious.

At thirteen times earnings, the shares are not expensively-valued.

Its planned acquisition of more efficient aircraft should help keep fuel costs in check, boosting cashflow for an airline that has established itself as a major player in the European market.

How to trade Ryanair into the results

Refinitiv data shows a consensus analyst rating of ‘buy’ for Ryanair – 5 strong buy, 14 and 1 strong sell - with the median of estimates suggesting a long-term price target of €21.00 for the share, roughly 26% higher than the current price (as of 24 May 2023).

Source: Refinitiv

IG sentiment data shows that 98% of clients with open positions on the share (as of 24 May 2023) expect the price to rise over the near term, while 2% of clients expect the price to fall whereas trading activity over this week and month shows 64% and 60% of sells respectively.

Source: IG

Ryanair – technical view

Ryanair’s share price has risen to a 15-month high on better-than-expected pre-tax profits with it fast approaching the January 2020 peak at €16.865. Once overcome, the November-to-May 2020/21 highs at €17.105 to €17.555 will be in focus.

Further up the November 2021 and February 2022 highs can be spotted at €18.255 to €18.50 and could be reached in the course of this year, provided that the Ryanair share price remains above its €13.63 March low. This incidentally coincided with the 200-week simple moving average (SMA), now at €13.875.

Ryanair Weekly Chart

Source: Tradingview

Short-term, the fact that the Ryanair share price has tried but so far failed to overcome last week’s high at €16.685 on more than one day this week may indicate that a short-term reversal may be in the offing.

This is especially the case since the daily Relative Strength Index (RSI) is not confirming this week’s high at €16.745 and is forming a lower high, a sign of negative divergence. More often than not, divergence points to a correction of the previous trend, and sometimes acts as an advanced warning signal of a trend reversal.

Ryanair Daily Chart

Source: Tradingview

As long as last week’s low at €15.590 isn’t being slipped through on a daily chart closing basis, the medium-term uptrend in the Ryanair share price remains intact.