2nd Feb 2024 18:17
(Alliance News) - Despite passenger numbers rising for Ryanair Holdings PLC and Wizz Air Holdings PLC on Friday, Liberum was unchanged on its ratings for the two budget airlines, urging investors to still buy Ryanair shares but to still sell Liberum shares.
Both companies said passenger traffic increased in January compared to a year before, despite suspended flights to Israel amid the ongoing conflict.
Dublin-based Ryanair said that it carried 12.2 million passengers in January 2024, up 3.4% from 11.8 million in the corresponding month last year. Its load factor fell by two points to 89% from 92% the year before.
On a rolling 12-month basis to January, Ryanair said it carried 182.1 million passengers, up 10% from 165.3 million the year prior. The load factor improved by one point to 94% from 93% in the first month of 2023.
Ryanair added that there was a short-term reduction to its load factor following the removal of most of its flights from online travel agency pirate websites in early December.
The airline added that out of the 71,700 flights it operated in January, over 950 were cancelled due to the ongoing Israel-Hamas conflict.
"A disappointing Q3 has few short-term implications with reduced FY guidance consistent with consensus. A forthcoming capex holiday could see equity free cash flow over the next two years of 32% of the current market capitalisation," said Liberum analyst Gerald Khoo on Ryanair.
"Even with bond redemptions, ongoing dividends and cash hoarding for future capex, there is likely to be headroom for cash distributions to shareholders. We trim estimates by less than 4% with a negligible change for the current year."
Accordingly, Liberum reiterated its 'buy' rating for Ryanair, although it did reduce its target price to EUR27 per share from EUR28. Shares in Ryanair closed up 1.3% at EUR19.80 each on Friday in Dublin.
Meanwhile, Budapest-based Wizz Air said it carried 4.7 million passengers in January, up 14% from 4.1 million a year ago. Capacity for the month was 20% higher at 5.8 million seats, compared to 4.8 million seats in January 2023.
Its load factor was lowered year-on-year by four points to 82% from 86%.
Wizz Air's carbon dioxide emissions in January grew 24% to 475,294 tonnes from 382,749 tonnes last year.
The Hungarian airline also said it will restart operations into Tel Aviv, with routes from Budapest, Sofia, Bucharest, Krakow, London and Rome from the beginning of March. Back in November, Wizz Air suspended operations in Israel.
"Following a disappointing Q3 update we make minor mixed changes to our forecasts but highlight a 15% cut to our [estimated] FY24 operating profit forecast. High leverage and cuts to earnings estimates are a worrying combination," said Liberum's Khoo on Wizz Air.
"Although the rating is undemanding, we see better value and lower risk elsewhere in the peer group where leverage is lower and earnings revisions positive."
Accordingly, Liberum reiterated its 'sell' rating for Wizz Air, with an unchanged target price of 1,700 pence per share. This was despite Wizz Air shares closing up 6.3% to 2,108.76p each in London on Friday.
By Greg Rosenvinge, Alliance News senior reporter
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