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Ryanair (RYAAY) Plunges 27.5%: Time to Buy the Dip?

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Shares of Ryanair Holdings (RYAAY - Free Report) have lost 27.5% compared with the industry’s 39.2% decline in the past month. Ryanair, like most other airline stocks, has been hit hard by the sharp drop in air-travel demand due to the coronavirus outbreak, resulting in the decline of the stock.


Coronavirus-Led Woes in Italy Dwarf Ryanair

Ryanair’s primary market is Italy, which is now the worst-hit European country. Consequently, demand from this key market has dropped significantly. As a result, Ryanair, which had earlier decided to trim its capacity to/from Italy by 25% from Mar 17 to Apr 8, announced that it intends to suspend more domestic and international Italian flights through Apr 8.

With demand anticipated to decline further, traffic and load factor are likely be ‘lower than normal’ in March and April. For April and May, Ryanair aims to trim capacity by up to 80%. In fact, the company aims to ground most of its aircraft in Europe over the next seven to 10 days

Ryanair’s CEO Michael O'Leary warned of a "meaningful impact" of the virus on fourth-quarter fiscal 2020 (ending Mar 31, 2020) results. Notably, due to low demand, Ryanair lowered its fiscal 2020 traffic forecast by 3 million to 151 million.

Ryanair is not the only carrier to have trimmed its capacity due to the viral outbreak. U.S.-based carriers including American Airlines (AAL - Free Report) , United Airlines (UAL - Free Report) and Delta Air Lines (DAL - Free Report) also suspended various flights in the wake of the coronavirus onslaught.

Buying Opportunity?

However, many investors may view the sharp drop in Ryanair’s stockprice as an opportunity to build position on the stock mainly due to its strong fundamentals. Additionally, the fact that the Zacks Consensus Estimate for current-year earnings has been revised 4.3% upward over the past 60 days signifies that analysts have not lost confidence in the Ryanair stock.

Also, its Momentum Score of B highlights the stock’s short-term attractiveness. Additionally, Ryanair carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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