Ryanair Taking the Lead
Ryanair is known for the Ultra-low fairs which operate short-haul flights. They have routes between Ireland, Morocco, Israel, The United Kingdom and parts of continental Europe.
Many have heard of Ryanair from being rated one of the Worst Airlines in the World by various ratings agencies. Although they may not be the fan favorite in the aviation community their business plan has certain attracted a wide array of travelers.
As more individuals look towards cheap alternatives towards being able to travel the world and explore the unique areas of Europe, Ryanair creates a system to where you are able to pay for the services and amenities that are requested.
With the grounding of the 737 MAX Ryanair was greatly affected as they have 210 on order which are designed in a specially catered configuration to be able to fit more passengers.
Today we have seen a major rise in the stock price for RYAAY after they released their earnings this morning and CEO Michael O’Leary took some time out of his morning to speak on the report.
Earnings Release for RYAAY
Earnings Per share beat forecast by $.44 and revenue was up $.2 Billion showing that they have had an incredible last quarter. Although their drive to reduce operations cost and drive profits plays a large role unfortunately they can’t take all the credit.
Part of the reason for the major uptick in travelers choosing Ryanair airlines has been due to the bankruptcy of Thomas Cook airlines. With millions of travelers in Europe attempting to recover any lost funds in the process were desperate for a solution.
Ryanair had the large fleet of aircraft at their disposal and with their ultra-low cost fair strategy it allowed for customers to be able to pay for exactly what was needed to make sure they got to their destination.
In the start of the morning we say RYAAY spike up near close to 10% gains after earnings. After the first 2 hours of the morning we have seen price start to settle down a bit and show a bit of retracement from the gap up.
Fundamentals of RYAAY
Currently Ryanair is in a great position to be able to grow their network and fill some of the gaps in Europe that need to be filled since the closing of Thomas Cook Airlines.
The pending orders for 737 MAX bring slight optimism for the company as they are projecting the need for the new aircraft. They are planning a date closer towards mid 2020 to late 2021 before the aircraft will be prepared for flight again.
That being said the overall outlook is optimisic from the fundamental perspective as they have a relatively young fleet. They are able to keep maintenance cost and training cost down by using the same aircraft throughout their fleet.
In the same idea they focus on increasing new steams of revenue through offering a variety of meals options and WiFi on-board which can be purchased for a premium.
Technical Set up for RYAAY
When we look at the chart for RYAAY we see how price gaps up on the news release and test right underneath the previous high for the chart.
Today based on how the candles close will give a better understanding as to if we are going to continue to hold onto the bias towards the upside.
There is an ideolgy in trading that when price gaps dramatially as it did that it will correct itself and close the gap. This is not always true.
It is important to take into consideration other factors such as the fundamentals and the current outlook for the future quarter before trading based on just technical aspects.
If for example we were to only look at RYAAY with the technical perspective we may be inclined to purchase some put options to create some benefit towards the downside movements.
Although for those who are trading based on fundamental and new releases they would be looking to hold RYAAY.
Timing is key when trading around new releases of stocks. Price can move incredible quick and it is important to not risk more than you are willing to loose on a single trade.
Prior to earnings I had purchased the Call option for RYAAY with the strike price of $50 with the expiration date of November 15th.
The premium was only $.14 for the option on Friday. Right at the open of the market as the new release breaks headlines my option which was purchase for only $.14 is now worth $0.87 per contract.
This resulted in a 521% gains over the weekend.
My maximum potential loss was only the $.14 initial premium invested.
This option still has 9 trading days till it expires and I personally believe there is plenty of room for the upside after these positive earnings.
What are you throughts on Ryanair? Do you think their business plan and placement will allow for expansion throughout Europe? Or will the desire for personal space and included amenities come back and drive consumers away from their ultra-low cost style?
Leave your comments below on what you believe is coming for Ryanair. As always happy trading and keep soaring.
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