We recently published a list of the 10 Best Airline Stocks to Buy For 2024. Since Ryanair Holdings Plc (NASDAQ:RYAAY) ranks 10th on the list, it deserves a deeper look.
Despite rising inflation, consumers worldwide continue to spend on travel and experiences, defying all expectations and forecasts. Latest data from the International Air Transport Association (IATA) estimates that the airline industry is expected to generate $30.5 billion in net income in 2024, driven by higher ticket prices and consumers’ desire to travel. Last year, the industry’s net income came in at $27.4 billion. According to data from the World Travel & Tourism Council (WTTC) the economic impact of the travel industry this year is expected to soar to $11.1 trillion, beating its previous level of $10 trillion recorded in 2019. The Council expects the tourism industry to become a $16 trillion industry over the next decade, accounting for about 11.4% of the global GDP.
However, not all is rosy in the airline industry. The competition in the industry is increasing, while geopolitical headwinds and rising employee costs continue to batter small and large airline companies. IATA was quick to highlight that despite the industry growth, airlines’ profit per passenger is just $6.14. Travel demand in China also remains subdued amid real estate and economic crisis in the country. However, analysts believe sooner or later the country would rebound and the best airline and travel companies would benefit from the influx of Chinese tourists.
A KPMG report on the airline industry highlighted the resilience of the airline industry and its fast recovery to pre-pandemics levels:
“The latest air travel data from IATA shows that passenger travel for November 2023 globally has reached 99.1% of November 2019 levels. November 2023 international RPKs reached 94.5% of November 2019 levels, while domestic traffic was 6.7% above the November 2019 level. Although international global travel remains 5.5% below pre-pandemic levels, IATA director general Willie Walsh said that the gap is “rapidly closing”, adding that current “economic headwinds are not deterring people from taking to the skies”. IATA also noted that long-term airline profitability shows that while the industry is exposed to external shocks, it typically returns to profitability “relatively quickly”.”
In this backdrop, we decided to take a look at some of the best airline stocks to buy in 2024 according to hedge funds. For that we first listed down all holdings of an airline ETF, which provides investors exposure to the airline industry and tracks some of the biggest and most important airlines and aviation companies of the US and worldwide. From these stocks we chose 10 companies with the highest number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A Boeing 737 aircrafts parked in an airport terminal with passengers awaiting to board.
Ryanair Holdings Plc (NASDAQ:RYAAY)
Number of Hedge Fund Investors: 20
Ireland-based ultra low-cost carrier Ryanair Holdings Plc (NASDAQ:RYAAY) ranks 10th on our list of the best airline stocks to buy in 2024 according to hedge funds. The company last month posted results for the year ending March 2024. Profit after tax in the period jumped 34% to 1.92 billion euros ($2.09 billion), while revenue saw a growth of 25% year on year to 13.44 billion euros. Despite Boeing-related delays, the company saw a 9% increase in traffic. As consumers reel under inflation and look for cheaper options, the budget airliner has been able to grow and see 100% load factors and expansion throughout Europe.
However, Ryanair Holdings Plc (NASDAQ:RYAAY) bears believe the company’s growth might slow down in the coming months amid increasing competition and costs. Another problem for the company has been online travel agents (OTAs) who have been adding unauthorized fees to the company’s fares. These concerns were highlighted by Deutsche Bank last month which downgraded the stock to Hold from Buy, pointing to the company’s acknowledgement that it’s seeing customer “resistance” against increasing prices. The bank’s analyst Jaime Rowbotham expects fares per passenger to remain flat on a YoY basis in fiscal 2024. The analyst said this would affect Ryanair Holdings Plc (NASDAQ:RYAAY)’s net profit in the future. Despite this, the stock’s valuation is attractive when compared to peers. UBS said in a May report that Ryanair Holdings Plc (NASDAQ:RYAAY) ‘s 12-month forward PE was 29% less than its US peers. The company’s revenue is expected to rise 9.90% this year and by 11.9% in fiscal 2026, while earnings growth is expected to come in at 13%. Based on these growth estimates, Ryanair’s forward P/E of 11.22 is indeed low.
As of the end of the first quarter of 2024, 20 hedge funds in Insider Monkey’s database of 919 reported owning stakes in Ryanair Holdings Plc (NASDAQ:RYAAY).
In its fourth quarter 2023 investor letter, Oakmark International Fund stated the following regarding Ryanair Holdings plc (NASDAQ:RYAAY):
“Ryanair Holdings plc (NASDAQ:RYAAY) (Ireland), a European ultra-low-cost airline, was the top contributor to the Fund’s performance this quarter. Ryanair released strong results for the first half of fiscal-year 2024 and was accompanied by an even stronger outlook, in our view. The company’s revenue grew 30% year over year, and average fares increased by 24% to EUR 58, driven by record demand and constrained capacity at European peers. Total passengers flown expanded 11% year over year to 105.4 million, and management is on track to maintain its target of 183.5 million passengers for 2024, depending on Boeing’s ability to meet its delivery commitments. Management is expecting full-year 2024 net income to be between EUR 1.85-2.05 billion ahead of the EUR 1.82 billion consensus estimate. The company’s strong free cash flow levels and balance sheet allowed Ryanair to reinstate a EUR 400 million dividend (35 cents per share). We spoke with CEO Michael O’Leary about additional uses for its excess capital and were happy to hear about an incremental EUR 1.5 billion return to shareholders starting in 2025. We continue to be optimistic about Ryanair’s future.”
Overall, Ryanair Holdings Plc (NASDAQ:RYAAY) ranks 10th on Insider Monkey’s list of 10 Best Airline Stocks to Buy For 2024. You can visit 10 Best Airline Stocks to Buy For 2024 to see other stocks in the list. While we acknowledge the potential of Ryanair Holdings Plc (NASDAQ:RYAAY), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than Ryanair Holdings Plc (NASDAQ:RYAAY) but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
