Ryanair shares set to 'tread water', says Canaccord

Analysts at Canaccord Genuity trimmed their target price on low-cost European carrier Ryanair's shares from €10.90 to €10.20 on Friday, noting that the group's share price looked set "to tread water" until the revenue environment recovered.

Canaccord acknowledged that both first-quarter passenger volumes and revenues rose 11% to 37.6m and €2.08bn, respectively, but highlighted the fact that average fares declined 6% during the period - but due to a strong performance in ancillary revenue, total revenue per passenger was broadly unchanged at €55.

Operating profits fell by 26% to €275.1m as unit costs excluding fuel rose around 4%, mainly reflecting the consolidation of Lauda, replacing expensive leases from Lufthansa with lower-cost operating leases and a 21% increase in staff costs.

Net profit and diluted earnings per share declined by 21% and 19% to €242.9m and €0.21, respectively.

The Canadian broker, which reiterated its 'hold' rating on the group, also said the uncertainty surrounding the MAX aircraft deliveries was also unhelpful and while it may provide near-term support to yields, it may also adversely impact unit costs and medium-term growth.

Canaccord reduced its average fare assumption for Ryanair from -1.0% to -1.5% for 2019-20 and from 3.0% to 2.0% for 2020-21 to reflect "the weak revenue environment and ongoing near-term uncertainties".