Barclays thinks Ryanair is a buy. It also thinks its earnings are about to get much worse.
The bank has come up with various “quirky” reasons to be bullish on the airline. For one, Europe’s growing focus on competitiveness will likely lead governments to ease some costs imposed by green regulation, says Barclays.
Despite being one of Europe’s most fuel-efficient airlines, Ryanair’s low fares mean green costs take up a relatively large share of the ticket price, making any easing of the rules particularly valuable.
Barclays also likes Ryanair’s decision to bring more operations in-house, helping it maintain its formidable cost advantage. And it sees potential in the large customer base being built through MyRyanair accounts, which could eventually allow Ryanair to make more money from passengers by selling them package holidays and other services. However, there is also a catch.
Ryanair has just cut its passenger target for the year to March 2027 from 216 million to 214 million, partly to limit its exposure to expensive unhedged fuel during the loss-making winter months.
The move is expected to reduce winter losses by €70 million to €100 million.
Barclays is more worried about what happens after that. It has slashed its forecast for Ryanair’s 2028 profits, leaving it 42 per cent below the current market consensus.
Ryanair has only 15 per cent of its 2028 fuel hedged, compared with 80 per cent for 2027, leaving it heavily exposed if fuel prices remain high.
Despite shares falling over 20 per cent this year, Barclays reckons this weakness is not fully priced in, saying it has captured “some but not all” of the fuel-related pressure. It expects consensus 2028 estimates to fall “very significantly” when investors next focus on Ryanair’s results.
For Ryanair shareholders, in other words, the good news may have to wait for the bad news to play out.