Shares of Ryanair Holdings RYAAY have not had a good time on the bourses of late, declining in double-digits over the past 180 days. 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 Southwest Airlines Co. LUV in the same time frame.

Six-Month Price Comparison

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Currently trading at $43.01, the stock rebounded 23.34% from its 52-week low of $34.87. However, it still reflects a significant 28.66% discount from its 52-week high of $60.29.

Let’s find out if it’s the right time to buy RYAAY.

Rising Expenses Weigh on RYAAY Stock

Escalating operating expenses due to high fuel costs, staff costs and higher air traffic control fees are hurting Ryanair’s bottom line. Evidently, total operating costs increased 24% year over year during fiscal 2024, owing to a 32% increase in fuel costs, higher staff costs (including pay restoration, crew, engineering & handler pay rises, higher crewing ratios and pilot productivity pay) and Boeing delivery delays.

During first-quarter fiscal 2025, operating costs rose 11% year over year, owing to higher staff and other costs which were in part due to Boeing delivery delays.

Moreover, events like the anti-trust inquiry, which was faced by Ryanair, along with Wizz Air and easyJet over price-fixing allegations for flights to and from Sicily, have affected its performance. These could harm consumer confidence in the company.

Given the headwinds surrounding the stock, earnings estimates have been southbound, as shown below.

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Upbeat Air Travel Demand: A Major Tailwind

Passenger volumes have been robust at Ryanair over the past few months owing to the rebound in air-traffic from COVID-19 lows. Driven by the air travel demand strength, RYAAY’s traffic rose 9% year over year during fiscal 2024 (ended March 31, 2024). During first-quarter fiscal 2025, traffic grew 10% year over year despite multiple Boeing BA delivery delays.

Additionally, RYAAY reported impressive traffic numbers for September 2024. The number of passengers transported on Ryanair flights was 19.1 million in September 2024, reflecting a 10% year-over-year increase. The September load factor (percentage of seats filled by passengers) of 94% remained flat sequentially as well as on a year-over-year basis.

To meet the upbeat demand, Ryanair expects its traffic view to increase 8% on a year-over-year basis for fiscal 2025, subject to Boeingdeliveries returning to contracted levels before the year-end.

Some Other Tailwinds Working in Favor of RYAAY Stock

We are impressed with RYAAY’s solid balance sheet. The low-cost carrier’s cash and equivalents increased to $5.15 billion at the end of first-quarter fiscal 2025 from $3.49 billion at the end of fiscal first-quarter 2024 reported figure. Meanwhile, the long-term debt level has decreased to $2.7 billion at the end of first-quarter fiscal 2025 from $3.1 billion at the first quarter of fiscal 2024-end.

RYAAY’s first-quarter fiscal 2025 long-term debt translates into a debt-to-capitalization of 28.4%, which is well below the sub-industry’s 65.7%.

Long-Term Debt to Capitalization

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A strong balance enables the company to reward its shareholders with dividend payments and share repurchases. So far, RYAAY has completed more than 50% of the €700m share buyback program started in May 2024. On completion, Ryanair will have returned more than €7.8bn to its shareholders since 2008. A final dividend payment of €0.178 per share was paid on September 2024.

To Conclude

Upbeat passenger volumes bode well for RYAAY. However, investors should refrain from rushing to buy RYAAY now due to the headwinds that it faces.

Instead, investors should monitor the company’s developments closely for a more appropriate entry point. For those who already own the stock, it will be prudent to stay invested. The stock’s Zacks Rank #3 (Hold) supports our thesis. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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