Turbulent day for Ryanair as stocks nosedive by 10pc
€330m wiped off value after rival’s warning
Close to €330m was wiped off Ryanair's value yesterday after a profit warning from rival easyJet prompted investors to offload airline stock en masse.
The selling spree plunged Ryanair's shares to an all-time low of €2.48 in morning trading, down 10pc in just hours, as aviation investors reeled from the news that easyJet's second half profits will be dented if oil prices stay at current levels.
"It was a very general sell- off," said one Dublin trader. "Ryanair is a stock that's fallen out of favour with investors across the board as oil prices have soared."
Goodbody's Joe Gill pointed out Ryanair's investors can "take some solace that the airline fessed up to the risk of oil earlier this year", referring to the airline's February announcement that net income could fall as much as 50pc in the 2008/9 financial year.
He added, however, that easyJet's revelation that the forward price of a ton of jet is now running at $1,000 makes Ryanair's February predictions "appear generous unless unit revenues kick in quickly".
Meanwhile, market sources said investors were becoming "increasingly concerned" about Ryanair's fuel costs since the airline becomes fully unhedged at the end of this month.
Ryanair plans to update the market on fuel hedging "whenever we feel it's appropriate", finance director Howard Millar said last night.
"We could go out and hedge today at over $100 a barrel but I don't think that would make investors any happier," he added. "Sometimes the share price goes up, sometimes it goes down, it's something that's happening across the industry and there's not a lot we can do about it."
EasyJet's own share price plunged as much as 17pc during the day, which also saw both low-cost carriers downgraded from 'buy' to 'hold' by UK investment bank Panmure Gordon.
Ryanair staged a lacklustre recovery later in the day to close down about 8pc at €2.55, while easyJet put in a more convincing rally but still closed down 9.5pc.
Ironically, Ryanair's €2.55 close came on the day stockbroker's Davy noted Ryanair was substantially undervalued at its opening price of €2.77.
"We believe that the current price (€2.77) does not reflect the Ryanair business model and franchise," said analyst Stephen Furlong.
"By our calculations, the break-up value, including passenger pre-payments is 380c. Our price target (€4.50) reflects a modest premium to this."
- Laura Noonan
