Ryanair Holdings plc (LON:RYA) has been downgraded to ‘hold’ from ‘buy’ by analysts at Liberum, who said while the budget airline was in “a market-leading position” they were cautious regarding “huge uncertainty” over government policy and the coming winter.
In a note on Monday, the broker said the cessation of activity earlier in the year during the widespread lockdowns across Europe had “at least provided a sense of clarity” for airlines despite the unprecedented uncertainty, with airlines knowing “what they could and could not do, and the main uncertainty was when they would be allowed to take to the skies again”.
However, Liberum said the current uncertainty is worse than the previous situation with “hugely inconsistent” travel ban policies across Europe, particularly Ryanair’s key UK market where quarantine policy is “increasingly volatile and unpredictable”.
“The recovery in demand since the resumption of flight operations has been relatively modest, but this seems likely to be choked off by the lack of predictability of government policies. Faced with the potential risk of being quarantined on arrival or return, many prospective passengers may simply choose not to travel at all”, Liberum said.
Despite this, the broker still saw Ryanair as a “long-term industry winner”, saying the company is “best positioned in almost every respect at present”.
“[Ryanair] is focussed on short haul routes and leisure travel, which should be more resilient and recover faster and sooner than long haul and business travel. It is the market leader, and less reliant upon airport slot constraints to defend against competitors. Finally, it has a strong balance sheet, with ample liquidity, but also with proven access to the capital markets (raised €400mln of equity and €850mln on new bonds in the past month)”, Liberum said.
However, the broker still retained its €12.50 price target on the stock as they saw “insufficient short-term upside potential to support a positive stance, despite the long-term attractions”.
Shares in Ryanair rose 0.7% to €12 in mid-morning trading.