Low-cost airline Ryanair (LSE: RYA) is making quite the buzz on social media today after it posted a weak set of full-year results.
Interestingly though, despite the share being in the news, its price is virtually unmoved. Here’s why I think that is the case.
Ryanair releases expected results
Ryanair posted a loss of €815m today for the full-year ending 31 March 2021. This is a quick reversal of fortunes from the €1bn post-tax profit last year. But it is not surprising. Not in the least.
When I wrote about the stock last month, it had just forecast its loss to range between €800m and €850m. That is exactly what has happened.
It is fair to expect then that the information would already be priced into the share price. I think it is. This is why the Ryanair share price is at almost the same as it was three weeks ago, when I last wrote about it.
Incidentally, those levels were at around three-year highs, which means that it has maintained them.
I do think, however, that the risks to the airline stock could have increased. This means that if I was interested in adding it to my portfolio, I would have a far better opportunity to buy on a dip now than I did a month ago.
The trigger is the coronavirus variant. Prime Minister Boris Johnson has flagged the risk of delays to the final easing of lockdown as Covid-19 cases caused by coronavirus variants rise.
Also, Ryanair itself has pointed out today that prices could rise in 2022 because of a 25% reduction in the number of seats available. This could impact at least some of its demand.
Additionally, I think the impact of increases in aviation fuel prices cannot be ruled out either. International Consolidated Airlines flagged this development in its recent update, and I have no reason to believe that it would be any different for other airlines.
Positives to note
Yet, I think that when there is an appreciable decline in the Ryanair share price, it is a stock to consider buying. Here is why.
The likelihood of a resolution to the pandemic is higher than going back into lockdown. While the airline does not provide any guidance for the next financial year, which ends on 31 March 2022, I think there are still some positives to note.
One, even though its overall mood is downbeat, the company does expect improvements in travel as more people get vaccinated. Two, it also expects its new aircrafts to reduce costs over the next decade. This can help it grow its markets where its competitors have failed. Three, it expects growth to rebound to pre-pandemic levels by the summer of 2022.
I have long been a believer that airline stocks, especially low-cost ones like easyJet, are good buys at deflated prices. I think Ryanair will be too, if its share price were to drop. But maybe not right now.
Manika Premsingh owns shares of easyJet. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.