Ryanair (NASDAQ: RYAAY) is an Irish passenger airline with a cost-leadership business model.
The company has faced a series of legislative headwinds lately in conjunction with the slowdown in operating volume during the pandemic’s travel restrictions.
Signs are that the airline’s fortunes are changing, and I’m bullish on the stock as a result.
New Aircraft, 737 Clearance, and Omicron
News recently broke that Ryanair is expected to take delivery of 65 MAX aircraft by the summer of 2022. The aircraft will be deployed to 14 new bases in an attempt to gain market share.
I for one see this as an add-on to the company’s positive alignment going into 2022 after its Boeing 737 MAX jets were cleared to fly again earlier this year after a crash in 2019 caused much of its fleet to remain stationary for two years.
Many of you may be thinking that Omicron and other coronavirus variants will offset the company-specific advantages in 2022. It’s evident that the pandemic still has its effects on air travel, but when we look at things through the lens of a recovery instead of an idealistic environment, it’s clear that 2022 will be a better year than 2021 for the industry, and Ryaniar in particular.
Earnings & Outlook
Ryanair’s operations have already recovered to an extent, and this was conveyed in last month’s Q2 earnings report. Over the past year, Ryanair has managed to increase its revenue by 69.5% as the previously mentioned factors all played a part.
Moving forward, although Ryanair sees difficulty in coping with rising input costs and covid restrictions, the company’s leadership thinks it will progress well throughout the year based on entity-specific measures.
According to the firm’s management: “Ryanair Group now expects to deliver accelerated growth over the next 5 years, with the growth forecast raised from 33% to 50%. As a result, Ryanair’s pre-Covid traffic of 149m is expected to grow to over 225m guests p.a. by March 2026 (previously targeted at 200m p.a.).”
The stock has gathered momentum recently, moving above its 10-day moving average by 3.8%. Furthermore, the relative strength index has moved out of oversold territory during the past month, signaling a cooldown in short-selling.
Airline stocks are a popular trend going into 2022, and now that Ryanair stock is gathering momentum, it may be an excellent time to cash in.
Wall Street’s Take
Turning to Wall Street, Ryanair has a Moderate Buy consensus rating, based on two Buys, one Hold, and no sells assigned in the past three months. The average Ryanair price target of $144 implies 36.3% upside potential.
Many might be hesitant of betting on airline stocks right now, as Omicron has unexpectedly hit the globe. However, the fact remains that air travel will see somewhat of a recovery in 20222, and Ryanair stock is one of my top picks because of its company-specific tailwinds.
Disclosure: At the time of publication, Steve Gray Booyens did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates Read full disclaimer >