Ryanair’s share price is tipped to rise by 30% over next year

RYANAIR’S share price is being tipped to rise by 30% over the next year according to a stockbroker’s report.

The budget airline, which reported a record 68% jump in net profit to 39 million earlier this week, is rated a “buy” by Goodbody Stockbrokers which has put a price target of 8 on their stock, 1.80 above its current level.

Ryanair’s share price has lost ground in the past few months as part of the wider volatility in global markets but it has not borne the brunt of the pressure on the ISEQ.

Since the start of the year, its market capitalisation has fallen by 9.3% to 4.563 billion while the Irish index has tumbled by 23.3% since January 1.

“We believe at the current price, the shares offer good value despite the gyrations in the general market.

While it may prove difficult for the shares to move meaningfully ahead until markets stabilise, we expect the share price to move in line with earnings growth over the next twelve months (29%).

This would suggest a share price of 800 cent,” said the report by equity analyst, James Forbes.

Ryanair’s first-quarter earnings beat Goodbody forecasts by 15% mostly due to a lower than expected decline in average fare price.

The government’s decision to green-light the building of an independent terminal at Dublin Airport is a welcome move for Ryanair but Goodbody does not expect the move to impact its forecasts for the next few years.

Ryanair is the biggest no-frills carrier in Europe but will be pushed into second place when Easyjet’s buyout of rival Go is finalised at a later stage this year.

The pressure to expand rapidly adding more and more routes is a constant pressure for budget carriers and yesterday Easyjet announced it was cutting four routes per day to ease pressure on staff.

During July, 28 flights were cancelled out of the airline’s typical 250 per day.

Word of the move came in a letter to Easyjet pilots from operations director Vilhelm Hahn-Petersen which said the company's 62% passenger growth in July had caused “severe disruption” which could not continue.

While Ryanair has matched Easyjet in terms of expansion, it has managed to dampen growth in operating costs relative to revenue.

The figures for the past quarter show a decline in operating costs growth to 22% versus an increase of 29% in revenues.

During that period, staff costs grew by 24% due to an increase in employees, mostly made up of pilots who would typically earn higher wages than average.

Last week, the airline also announced the purchase of three more aircraft through its deal with Boeing which gave it an option on 50 new planes over the next 8 years.

The three aircraft will be delivered during Spring 2003 bringing the total number of new aircraft to boost the fleet by next Summer to 13.