Ryanair is no longer a 'buy' says Goldman Sachs

Goldman Sachs has downgraded Ryanair Holdings PLC (LSE:RYA) to 'Neutral' from 'Buy', citing a 'normalisation' in valuation and a softer near-term earnings outlook, as previous catalysts have played out. The bank now forecasts FY25 net profit at €1.63 billion, below consensus, and reduced its FY27 forecast by 4% to €2.30 billion, attributing this to weaker summer 2025 fare data and anticipated higher sustainable aviation fuel costs. While Goldman cut its 12-month price target to €27.50, implying approximately 14% upside from current levels, it views the risk-reward as less compelling compared to the broader transport sector.

Analysis

Goldman Sachs has downgraded Ryanair Holdings (RYA) to 'Neutral' from 'Buy', signaling that the period of outperformance driven by prior catalysts has likely concluded. The rationale is twofold: a 'normalisation' in the stock's valuation and a weaker near-term earnings outlook. Goldman's analysts have revised their FY25 net profit forecast to €1.63 billion, which is below the market consensus of €1.70 billion, and have also reduced their FY27 forecast by 4% to €2.30 billion. These downward revisions are attributed to tangible headwinds, including weaker-than-expected fare data for summer 2025 and anticipated higher costs associated with sustainable aviation fuel. Despite cutting the 12-month price target to €27.50 from €29.50, this new target still implies approximately 14% upside from the current price. However, at this target, the stock would trade at a forward P/E multiple of around 13x, which is in line with its long-term average, reinforcing the view that the valuation is no longer heavily discounted. Consequently, Goldman Sachs now views the risk-reward profile as less compelling when compared to the broader transport sector.

Key Decisions for Investors

• Investors with existing long positions should consider the 'Neutral' rating and softer near-term earnings outlook as a signal that the stock's primary upward catalysts may have been realized, making it prudent to re-evaluate position size.
• While the revised price target of €27.50 still implies 14% upside, potential investors should be cautious of near-term headwinds from weaker fare data and rising fuel costs, which could create a more attractive entry point if the stock price weakens.
• Given the view that Ryanair's risk-reward profile is now less compelling, portfolio managers should assess its weighting relative to the broader transport sector and consider rotating into peers with stronger near-term catalysts.