Liberum upgrades Ryanair on higher profit guidance

Liberum upgraded Ryanair on Thursday to ‘buy’ from ‘hold’ and upped the price target to €16 from €13 after the budget airline lifted its profit guidance.

After the close of markets on Wednesday, Ryanair bumped up its profit guidance to between €1.325bn and €1.425bn from previous guidance of between €1bn and €1.2bn following better-than-expected demand over Christmas.

"Strong pent-up travel demand over the holiday season for the first time in 3 years, with no adverse impact from Covid or the war in Ukraine, stimulated stronger than expected peak Christmas/New Year traffic and fares," the airline said.

Liberum said it has raised its forecasts to reflect the new current year guidance, resulting in a 24% increase at the EPS level for March 2023E. The broker has also raised its 2024E and 2025E forecasts, reflecting the higher base from 2023E and updated fuel and FX assumptions.

"We still view Ryanair as a long-term winner in the European airline industry," it said.

"We see this as underpinned by its market leadership in European short haul, low unit costs, robust exploitation of its bargaining power wherever possible, pan-European network footprint and strong balance sheet.

"These strengths have allowed Ryanair to improve its strategic positioning as a result of the pandemic, and a likely recession may offer another opportunity to gain at the expense of weaker competitors."