Ryanair share price in the brace position ahead of H1 earnings

Ryanair share price (RYA) could experience turbulence in the wake of a key update.

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Airlines routed by COVID-19

If describing a fundamental situation as the perfect storm for a stock or sector can sometimes seem like it is overdone, the story for Ryanair shares and the plight of discount airline in 2020 could not have been more challenging. Perhaps the only plus point one can dig out is that the lower cost of fuel in the wake of the pandemic might have helped Ryanair on a marginal basis. However, the story for those holding Ryanair shares has generally been one of woe, given the way that the sector has been hit on multiple fronts. 

 

Ryanair share price hit by lockdowns and quarantine

By definition lockdowns and quarantine are going to damage all parts of the travel industry. This can be from passengers simply not being allowed to fly, to not being able to afford to fly due to job insecurity or furlough. However, perhaps the greatest damage has been with respect to anti-COVID-19 measures changing constantly. Ryanair itself has moved goalposts too, with capacity over winter 2020 to be reduced from 60% to 40%. Not surprisingly, it made this move after traffic in September fell by 64%. All of this has been part of a dash to lower costs as revenues have tumbled, with action taken in Q1 in the wake of the first pandemic wave to slash expenditure by 85%.

 

H1 earnings in focus for Ryanair shares

The forthcoming report on November 2 from Dublin based airline is likely to be very revealing, as we shall find out a number of aspects regarding the fundamentals that lie behind shares of Ryanair. For instance, whether the cost cutting and capacity cuts have stemmed losses in a meaningful way. We will also discover whether the impact of COVID-19 is still worsening, or there has been a degree of stabilisation. While Ryanair shored up its balance sheet in September via a placing of €400m, we have yet to see whether this is enough. In the meantime, analysts’ forecasts are for a 61% decrease in revenue to $1.33bn. This compares to $3.42bn a year ago. But perhaps the worst aspect predicted is the swing in earnings per share, from $4.50 to a loss of 25 cents.

 

Ryanair share price forecast: massive resistance towards €13

Like many sector counterparts, shares of Ryanair hit the floor near €8 in March as lockdown measures were introduced. This was ironically only a couple of months after peaking at €16.96, almost as if in January those holding Ryanair shares felt they could ride out the burgeoning COVID-19 crisis. What is interesting currently is that the stock of Ryanair has managed to make back half the losses since March. However, unless the forthcoming H1 update from the airline reveals very positive fundamentals, strategically technically traders would be assuming post June resistance at €13 will mark the ceiling for the shares, and a possible return towards the €8 could be seen early in 2021.

To see all upcoming news and data releases that’ll have an effect on the financial markets, check out our Economic Calendar. It’ll cover all major releases from global economies and give you the exact time the release is due, the previous data, forecast data and actual data (once released).

 

RYA share price daily chart

Daily chart showing Ryanair share price daily movements for 2020

 

Looking to learn more about risk management and how it can benefit your trading? Check out our Risk and reward ratio article for more insight.

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