Ryanair has formed a bullish three-week-tight pattern, a follow-on chance to buy shares after a May breakout. The company, today's pick for IBD 50 Stocks to Watch, is riding high as airline stocks build strength amid a pickup in summer travel and cheaper fuel prices.
The pattern is bullish on two counts: A three-week-tight pattern is one of the best follow-on chart formations. Further, price closes were near the weekly highs in all three weeks of the pattern.
The Accumulation/Distribution Rating of B- also shows a good amount of interest from fund managers.
Purchase of Boeing 737 MAX-10 And Strong Cash Position
The growth stock broke out of a flat base with a buy point of 99.34 in early May ahead of fiscal fourth-quarter earnings. Shares rose on news of a record purchase of up to 300 new Boeing 737 MAX-10 planes worth up to $40 billion.
According to CEO Michael O'Leary, the "new, fuel efficient, greener technology aircraft offer 21% more seats, burn 20% less fuel and are 50% quieter than the B737-NGs."
The purchase is subject to shareholder approval in September. If approved, deliveries will start two years after the last delivery of the B-8200 Gamechanger, a high-efficiency version of the 737.
Delivery will be phased between 2027 and 2033. Of the new aircraft, 50% will replace the older B737-NG. The company expects to be able to meet a substantial part of the cost through internal cash flows due to its strong balance sheet. According to company reports, the company has a BBB+ credit rating due to its strong gross cash of 4.7 billion euros at fiscal year end.
The company owns almost all of its B-737 planes, which leaves it a favorable position in a period of higher interest rates that make new purchases more costly.
March-quarter sales of $2 billion were up 54% from the previous year though the growth stock saw a loss of 72 cents after three turnaround quarters.
Analysts polled by FactSet have strong views for the June quarter and expect to see sales growth of 30% from the previous year, to $3.46 billion, and earnings per share of $1.92 compared to $1.01 a year ago.
With travel coming back strongly, the company has its largest summer operating schedule set for 2023, with over 3,000 daily flights across 2,500 routes.
Growth Stock Has Strong Technical Ratings
Ryanair is in the airlines industry group which holds 11th place among IBD's 197 groups.
The Composite Rating and RS Rating are both 93 out of 99. The EPS Rating trails at 33 because of losses the company suffered in the 2021-2022 fiscal years.
Ryanair specializes in low-cost air travel and is based out of Dublin, Ireland. With flights to several destinations in Netherlands, Switzerland, Italy, the U.K, and France, the company's operations are entirely within Europe and the Mediterranean countries.
American Depository Receipts of Ryanair Holdings trade on the Nasdaq. Fund ownership has been growing over the past four quarters. Nearly 30% of shares outstanding are held at big institutional firms, according to IBD MarketSmith.
The Fidelity Nasdaq Composite Index ETF and the U.S. Global Jets ETF are two ETFs that hold shares of Ryanair.
Please follow VRamakrishnan on Twitter for more news on the stock market today.
