Murky waters

Pre-pandemic, the travel cruise industry was a rather lucrative one to invest in. The top cruise companies enjoyed profit margins of over 10%, and an ever growing market. Consequently, Carnival enjoyed consistent top and bottom line growth throughout the years.

Then came the pandemic, which nearly destroyed the entire cruise ship industry, as passenger numbers plummeted to levels not seen since 2000. Nonetheless, a sharp rebound in 2021 seemed to indicate that travel may be returning with a bang. Even so, a great deal of uncertainty still lies ahead for Carnival.

Is Carnival getting started?

At the end of last week, management announced its plans to release its Q2 earnings later this week. As such, future bookings will be one of the most important metrics I’ll be paying attention to. The majority of Carnival passengers travel to and from the United States. I’m expecting a decent figure, after the US lifted testing requirements last week.

If a stronger than expected bookings number is reported, I envision the Carnival share price to rebound. On the flip side, a much weaker than expected number could be the nail in the coffin for the FTSE 250 firm. Nevertheless, Carnival shares are up 8% on Monday as investors gear up for the much anticipated report.

That being said, although Covid variants have taken a backseat, another mutation could send the travel industry into another decline. Additionally, persistent economic headwinds are expected to hinder passenger growth in the coming quarters. High oil prices, roaring inflation, and ever increasing interest rates have consumer sentiment pointing towards a recession. These worries were echoed recently by a Morgan Stanley analyst who predicts lacklustre sales for the cruise ship company.

A sinking ship?

Despite the potential upbeat numbers, there’s one thing I can’t ignore about Carnival, and that’s its soaring levels of debt. The company only has $7bn in cash and equivalents, and almost $36bn of debt to repay. While its near-term repayments aren’t too hefty, the figure only gets exponentially higher from here on out.

With the increasing amount of repayments, the firm will have to hope that the industry rebounds sharply and quickly to generate enough cash. Otherwise, I foresee the board issuing stock to raise cash, thus sending the Carnival share price even lower. The alternative would be to refinance its debt, but doing so risks taking on higher interest rates, and a higher total repayment value.

If historic demands returns, Carnival shares may just make one of the biggest comebacks. However, that remains a slim possibility given the current economic landscape. Not to mention, a Bloomburg analyst even red flagged Carnival’s ability to meet repayments. Therefore, I’m doubtful that the Carnival share price can recover from these levels for the foreseeable future. So, I won’t be investing in Carnival shares. Instead, I’ll be investing in other growth stocks that have better financials.

The post Can the Carnival share price recover from an all-time-low? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

Up and away?

I would have expected the IAG share price to lift off after it reported a generally positive set of Q1 results last month. The group managed to recover a substantial amount of its losses to €731m from €1.1bn a year ago. Total revenue before exceptional items was up by a whopping 485% year on year (Y/Y).

In addition to that, total passenger numbers saw an increase to 14.4m, alongside a 72% load factor (A measure of how full a plane is). Most importantly, IAG expects its operating results to be profitable from Q2 onwards, which is great news for investors. So, why’s the stock stalling then?

Sky’s not the limit

The negative sentiment surrounding IAG shares can be attributed to passengers being warned of major delays this week. Workers are carrying out a ballot over a potential pay strike. Check-in staff at Heathrow airport said that the company has refused to reverse a 10% pay cut imposed on them during the pandemic. Meanwhile, management pay has been restored to pre-pandemic levels.

Trade Unite, the trade union representing these staff disclosed that the industrial action ballot covers around 500 staff, and is expected to close on 27 June. An unfavourable settlement would most probably lead to strikes in July, which is IAG’s busiest period of the year. With a bottleneck of queues already building up outside several UK airports, this could very well hinder IAG’s route to profitability in the short to medium-term.

To make matters worse, the group is also facing shareholder pressure over a decision to decrease CEO Luis Gallego’s share compensation. IAG’s annual general meeting is fast approaching, and shareholders are not very keen on awarding its chief executive after the company posted enormous losses during the pandemic.

Flying blind

Nonetheless, do the positive figures from the group’s Q1 report make IAG shares investible for me? I think not. The conglomerate’s balance sheet still remains undesirable, as its staggering amount of debt is not well covered by operating cash flow. Despite IAG reducing its debt levels by 0.6% last quarter, a potential slowdown in customers may undo its recovery.

I expect travel tailwinds to slow down in the coming quarters as economic headwinds start to take shape. Inflation in April came in at 9%, and with further interest rate hikes expected, I am doubtful that passenger numbers will continue recovering at the same pace.

Although the lifting of lockdowns in China should see passenger numbers rise in Asia, oil prices have also risen. Oil is now hovering around $120 per barrel and will definitely have a negative impact on IAG’s bottom line. This sparks fresh concerns as to whether the company’s guidance of achieving operating profitability by Q2 is still a realistic possibility. As such, I will not be looking to invest in the IAG shares. Instead, I’ll be looking to purchase other shares that could benefit my portfolio with more financial security.

The post The IAG share price is down 15%. Should I buy? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

Lloyds

As Lloyds (LSE: LLOY) continues its share buyback programme, the British bank has seen its stock price increase by 3% this week. A hawkish Bank of England has been stoking uncertainty surrounding Lloyds’ future. This arguably led to a number of director dealings happening this week.

Most notably, Lloyds’ CFO William Chalmers and Chief of Staff Janet Pope purchased a large number of shares. However, Group Corporate Affairs Director Andrew Walton and Scottish Widows Chief Executive Antonio Lorenzo also sold a substantial number of shares.

• Name: William Chalmers (Chief Financial Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 20 May 2022
• Amount purchased: 168,865 @ £0.44
• Total value: £74,409.46

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 884 @ £0.43
• Total value: £383.86

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: Disposal of shares
• Date of transaction: 20 May 2022
• Amount sold: 250,000 @ £0.44
• Total value: £110,062.50

• Name: Vim Maru (Group Director, Retail)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 31 @ £0.43
• Total value: £13.46

• Name: Janet Pope (Chief of Staff and Group Director, Sustainable Business)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022 and 20 May 2022
• Amount purchased: 85,633 @ £0.44
• Total value: £37,735.00

• Name: Stephen Shelley (Chief Risk Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 1,563 @ £0.43
• Total value: £678.70

• Name: Andrew Walton (Group Corporate Affairs Director)
• Nature of transaction: Disposal of shares
• Date of transaction: 19 May 2022
• Amount sold: 184,216 @ £0.43
• Total value: £79,986.68

IAG

The IAG (LSE: IAG) share price is up about 4% this week as the group announced a share buyback programme on Tuesday. Apart from that, a number of big director dealings occurred at IAG. Chairman and Iberia CEO Javier Sanchez-Prieto and CFO Nicholas Cadbury made the headlines. The latter had already received 1,473,207 shares as a part of IAG’s executive share plan, which will be vested in three tranches annually. Despite that, Cadbury still purchased more shares.

• Name: Javier Sanchez-Prieto (Chairman and CEO Iberia)
• Nature of transaction: Transfer of shares from one nominee account to another nominee account with no change of beneficial ownership
• Date of transaction: 23 May 2022
• Amount transferred: 181,014 @ Nil
• Total value: N/A

• Name: Nicholas Cadbury (Chief Financial Officer)
• Nature of transaction: Acquisition of shares
• Date of transaction: 24 May 2022
• Amount transferred: 254,979 @ £1.23
• Total value: £312,604.25

SSE

SSE (LSE: SSE) reported a decent set of numbers in its FY22 earnings this week. The firm generated profits of £1.5bn last year, and expects to make even more this year from high energy prices. But a windfall tax from the British government soured investor sentiment, sending the SSE share price down by almost 10%. Still, outgoing non-executive director Dame Angela Strank acquired a respectable number of shares.

• Name: Dame Angela Strank (Non-Executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 25 May 2022
• Amount transferred: 483 @ £18.49
• Total value: £8,929.14

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this article’s instance, Lloyds’ director dealings used the dividends they received on SIP shares to reinvest into further Lloyds shares. It should be noted, though, that dividend shares must normally be held in the trust for at least three years to get full tax relief. On the other hand, IAG’s CFO received free shares as part of his compensation package.

The post Director dealings: Lloyds, IAG, SSE appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group. 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.

Higher altitude expected

So, why is the IAG share price down then? The group reported an operating loss of €731m. This was much better than the €1.1bn loss it incurred a year ago after all. While this is a 32% improvement, the figure still fell below analysts’ expectations of €548m. Additionally, total passengers also fell below expectations of 15.3m. The group reported a figure of 14.4m instead. Finally, worries of staff absenteeism and IAG having to fork out additional capital to hire workers soured investor sentiment. Therefore, the share price dipped from expectations not being met.

Transit-ory

Pushing the negatives aside, there were lots of positives to takeaway. IAG is in a transitory period as it gears up towards profitability, and the numbers don’t lie. For one, total revenue before exceptional items was up by a whopping 485% year on year (Y/Y). This beat analysts’ expectations of €3.37bn as the final figure was €3.43bn.

Load factor, a measure of how full a plane is, also saw a monumental increase. The metric jumped to 72%, which was also above consensus of 69%. Nonetheless, this was still 41% down from pre-pandemic levels, as travel to Asia continues to be hampered from Covid restrictions.

Even though the conglomerate’s balance sheet still remains undesirable, it’s worth noting that IAG reduced its debt levels by 0.6%. On top of that, it also improved its liquidity position. Cash and equivalents came in at €8.2bn, a €241m improvement from last quarter.

Sky-high inflation

The main surprise for me was the guidance provided in the trading statement. I was amazed to see that IAG expects its operating results to be profitable from Q2 onwards. In light of the recent guidance provided by many of its other competitors, this could be possible. As such, the airline group may very well be in for a windfall of profits in the short term.

Nevertheless, I am still cautious about the optimistic IAG guidance. This is because, despite industry tailwinds of travel recovering, consumers continue to face a cost of living crisis, with the worst yet to come. The Bank of England recently raised its bank rate to 1% and predicts a contraction in the British economy towards the tail end of the year. Given that the majority of the firm’s customers fly on British Airways, a contraction could lead to a substantial hit to IAG’s customer base.

To conclude, although IAG remains upbeat about its prospects in achieving profitability for the year, I think the path ahead is a cloudy one. I believe inflation will eat into discretionary spending eventually. It’s only a matter of time before the travel industry has to hit the brakes once again. With that being said, I don’t think the IAG share price will recover to its highs of £4.50.

The post Can the IAG share price recover from its slump? appeared first on The Twelfth Magpie.

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John Choong has no position in any of the shares mentioned at the time of writing. 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.

However, a combination of positive results and easing restrictions has given IAG new wind over the past few months, with the shares up 8.7% year-to-date. Can this trend continue? Let’s take a closer look.

Encouraging travel data

As mentioned, the global easing of travel restrictions over the past few months has vastly increased footfall across the travel sector. For example, in the first week of 2021, there were 71,738 European flights. Fast forward to the first week of 2022, that number almost doubled to 139,438. In addition to this, Skyscanner – an online travel booking agency – said that bookings for return flights to the UK this summer were up almost 400% in January compared to December.

These numbers have already filtered down into IAG’s business. In its latest trading update, it reported a passenger capacity jump from 21.9% to 43.3% of 2019 levels. In addition to this, its cargo transport has also seen a heft capacity rise, to 73.4% of pre-pandemic levels. IAG releases its full-year results on 25 February and if it sees more results like these, then I would expect the share price to increase further.

There is still significant progress to be made, but it seems that IAG is moving in the right direction. What’s more, Australia announced the reopening of its international borders last week. As confidence in the travel sector grows, the IAG share price could continue to climb.

Headwinds for the IAG share price

The most obvious challenge that IAG must contend with is the continuing threat the pandemic poses. Although restrictions are easing, there is still a high possibility that the virus could cause more disruptions throughout the year. If this is the case, it could place a lid on the growth of the IAG share price.

In addition to this, the pandemic left IAG with over €12bn net debt. This was the case across many other airlines, as the costs of maintaining grounded aircraft piled up. With interest rates creeping up, these debts could be quickly magnified unless addressed soon.

A final risk for the IAG share price is the steep competition that the firm faces from other flight providers. For example, competing airline Ryanair recently announced it would be offering big discounts to incentivise customers. This could draw IAG into a price war, which is the last thing it needs while trying to rebuild its business.

The verdict

Overall, the current IAG share price seem seems to me to be in a good place for growth right now. I think investors are realising the impacts of increased footfall, which is helping push the shares up.

However, with pandemic uncertainty and hefty debts on its plate, I’m not comfortable buying the stock just yet. I’m going to wait for the full-year results, and to see how IAG fares over the course of the next few months, before considering adding it to my portfolio.

The post Is the IAG share price about to take off? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. 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.

Rolls-Royce (LSE: RR) shares were devastated by the pandemic, falling drastically from their pre-Covid level. However, in the last quarter, momentum seemed to have picked up for the firm, with the shares climbing to 144p during October.

This momentum quickly ended, however, with the announcement of the Omicron variant. The shares have slumped over 12% in the past 30 days as a consequence. Does this present me with a buying opportunity? Let’s take a closer look.

Rolls-Royce share price outlook

Rolls makes the majority of its money from servicing jet engines. As such, the constant travel bans have plagued share price growth. While things seemed to be easing, the Omicron variant has led to a resurgence in coronavirus regulations. Many long-haul flight routes have virtually halted. The bad news was felt across the travel industry, with IAG and EasyJet both seeing double-digit share price drops after the news broke. In addition to this, many analysts don’t expect the aviation industry to fully recover until 2024. If this is the case, it could place a lid on the future growth of Rolls-Royce shares.

However, the Omicron variant has also boosted government responses to the coronavirus. For example, in the UK Covid-19 booster jabs are now being rolled out at a much faster rate to combat the variant. With more and more of the UK population vaccinated, it’s likely that travel numbers will ultimately increase. This could help keep Rolls-Royce shares afloat.

I think the 2022 summer season could prove pivotal for the travel industry. If the sector can enjoy high capacity, then consumer sentiment may be restored. This could lead to more abundant travel throughout the latter half of 2022, speeding up recovery for the sector. This would be great news for Rolls-Royce shares. However, it’s contingent on governments tackling the virus effectively.

Economic problems

One thing that worries me about Rolls-Royce is the firm’s capital structure. It currently has over £4bn of debt on its balance sheet, largely from pandemic-linked loans to keep the firm afloat. The reason this worries me is tied to the direction of the UK economy. Inflation has been steadily creeping up of late, with UK consumer price inflation (CPI) hitting 3.8% over the past 12 months. This is almost double the UK’s target of 2%. Due to these high increases, many investors are expecting an increase in interest rates. If this occurred, it would add to Rolls’ debts.

In just over a week, Rolls will release a trading update. I think this will prove pivotal for the direction of Rolls-Royce shares. In addition to this, it will show investors if the recent addition of Anita Frew as a non-executive director might be making an impact. Frew has chaired multinational chemicals company Croda International for the last five years, delivering huge success. If the report contains some good results, I’d hope that Frew’s impact on Rolls’ management could lead to some great longer-term growth for the firm.

Overall, although Rolls-Royce shares do look cheap to me, I’m not confident enough to buy just yet. I’ll be waiting eagerly to see the firm’s trading update before I consider adding the stock to my portfolio.

The post Should I add Rolls-Royce shares to my portfolio today? appeared first on The Twelfth Magpie.

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Dylan Hood has no postition in any of the shares mentioned. 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.

Impressive recovery

easyJet’s Q3 results offered investors some encouraging numbers. Costs fell to £34m per week, which actually outperformed the Q1 guidance of £40m. Although these costs may seem steep, the fact that the company is performing better than expectations is a great signal to investors of effective management. In addition to this, the firm has signalled Q4 capacity will be near 60% of its 2019 levels, as opposed to 17% in Q3, meaning revenues will start to increase again. Both of these metrics seem to point easyJet shares in the right direction.

Another notable point that could help easyJet and its share price move forward is the costs streamlining the pandemic has forced on the firm. A bold (albeit sad) move of cutting staff by 30% was initially met with industry criticism. However, it is a large part of the reason the firm was able to shrink its losses to £318m for Q3. Moving out of the pandemic, I expect easyJet to continue this effective cost management, which could drive future profit margins higher. This would be great news for easyJet shares.

Risks lie ahead

There are still some serious risks to easyJet shares. The constant uncertainty of the pandemic continues to haunt the travel industry and as my fellow Fool Charlie Keough highlighted, many analysts don’t expect the aviation industry to fully recover until 2024. Predictions like this are a big red flag for stocks like easyJet.

In addition to this, the shares have fallen almost 20% in the past six months, slowing down the momentum the stock gained in the tail end of 2020. It is a similar case with peers TUI, and IAG, which have seen their share prices tumble by 29% and 22% in the past six months, respectively. This negative market sentiment doesn’t place easyJet shares in a strong position, in my eyes.

A good time to buy easyJet shares?

I think the shares still have some challenges to face. Although cost management and flight capacity numbers are encouraging, there is still a long way to go before the firm is back to its pre-pandemic self. Broader market sentiment also seems to be negative, which isn’t great news for the firm. I sold my easyJet shares in March and am waiting until I have a clearer picture of the travel industry’s future before possibly adding them back in my portfolio.

The post Is now a good time to buy easyJet shares? appeared first on The Twelfth Magpie.

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Dylan Hood has no position in any of the shares mentioned. 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.

As the vaccine rollout continued, along with new contracts being signed, the company started recovering. But last week it jumped by 14% in a day. What caused this sudden growth? And should I be adding this stock to my portfolio?

The surge in the Meggitt share price

Such a substantial rise in a share price is usually attributed to an excellent earnings report or a rumoured takeover. In the case of Meggitt, it appears to have been driven by the latter, a potential buyout. Last week, a report published by Dealreporter indicated that US company Woodward Inc is looking to make an acquisition offer.

An acquisition or merger is plausible but as it stands, it remains only a rumour. Meggitt’s management team has so far refused to comment. But if it turns out to be true, then the company will have to inform its shareholders relatively soon.

Despite the most recent gain and steady recovery over the last 12 months, the Meggitt share price is still firmly below pre-pandemic levels. But it has increased by more than 90% over this time period. Assuming that an offer is made, it’s likely that the stock will surge once again to meet the proposed price, whatever that may be. However, if the rumours prove to be just rumours, then I think it’s likely to see some short-term decline as traders lose interest.

A company worth owning?

Ignoring the possibility of a buyout, is Meggitt a company I would want to own a part of as a long-term investment? Looking at its full-year 2020 results, revenue and underlying profits fell by 22% and 53%, respectively. This is obviously not a good sign. However, upon closer inspection, there are reasons to be optimistic.

The majority of this impact originated from reducing aircraft parts orders in the firm’s civil aerospace division. This is not surprising, given that travel restrictions have kept most planes on the ground. But the vaccine rollout is progressing relatively quickly both here in the UK and in the US. Therefore the order book may soon begin to recover, especially since domestic and short-haul flights are already back on the rise. 

Meanwhile, the firm’s Defence segment actually achieved some growth thanks to the US government ramping up defence spending. And while its Energy segment did suffer some disruptions due to volatile oil prices, its projects were merely delayed and not cancelled. It means this revenue has not been permanently lost. In other words, it looks like the Meggitt share price may be able to fully recover to pre-pandemic levels this year. 

The bottom line

As exciting as a potential buyout is, it’s a poor reason to invest in my experience. But looking at the underlying business, Meggitt appears to be on the road to recovery. And the senior managers seems to agree, as they expect underlying profits to return to growth later this year.

With a seemingly healthy balance sheet and a clear path to recovery, I would consider adding Meggitt to my portfolio as a long-term investment.

The post Why did the Meggitt share price surge last week? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Meggitt. The Motley Fool UK has recommended Meggitt. 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.

But since then, the company has been making a swift recovery and is now trading above pre-pandemic levels. Last week its climb continued to be just shy of a new three-year high. What’s causing this growth? And should I be adding the stock to my portfolio?

The rising Ryanair share price

One of the main contributing factors of Ryanair’s growing share price stems from the return of international travel. Lockdown restrictions and border closures were introduced last year to counter the spread of Covid-19. This ultimately led to the majority of flights being grounded.

With the vaccine rollout progressing relatively quickly both here in the UK and in America, planes are once again taking to the skies. Holiday travel for Britons is set to resume next week. And while the list of ‘green’ countries remains quite limited, it does include popular destinations such as Portugal, which Ryanair flies to.

What’s more, even without the imminent boost to business, the number of non-holiday flights is already back on the rise. In April alone, the company completed 8,000 trips transporting around a million passengers around the world. By comparison, only 40,000 passengers were flying a year before.

Needless to say, that’s quite a substantial recovery, especially since each aircraft is currently operating with a 70% carrying capacity. Therefore seeing the Ryanair share price climbing is not that surprising to me.

Looking ahead

As promising as I find these numbers, there are a few things that concern me. Ryanair is prominently a short-haul flight business operating within Europe. But the vast majority of its destinations still have significant travel restrictions in place due to high infection rates. As a result, the management team estimates that total passenger numbers for 2021 will be at the lower end of guidance.

This is particularly worrying as the vaccine rollout within Europe is still progressing relatively slowly. With a third wave of infections predicted to occur later this year, many of these countries could be moved from the ‘amber’ list to the ‘red’ list. And consequently, it would likely have a significant impact on the Ryanair share price.

The bottom line

These disruptions are ultimately short-term problems. And given the company has a large cash war chest of around €3.8bn (£3.3bn) with the additional capability of signing sale-leaseback agreements, its liquidity remains strong, in my opinion.

And so I think the Ryanair share price can continue to grow this year and over the long term. But having said that, this isn’t business I’d want to add to my portfolio. Looking back at its pre-pandemic financials, while revenue has continued to grow, its profit margins have suffered, resulting in a consistently contracting bottom line. Personally, I think there are far better businesses to own today.

The post Can the Ryanair share price continue to grow in 2021? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Ryanair. 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.

Greggs share price: on a roll

It would be easy to assume my main reason for thinking the Greggs share price could continue climbing is down to the “great unlock” of the UK’s high streets. Of course, this should help. After all, many of the company’s 2,000-plus shops are located in now-bustling towns and cities. Then again, I also believe quite a bit of the positivity surrounding this is priced in already. 

What’s perhaps not priced in so much is the recovery in earnings once overseas travel is allowed to resume. The FTSE 250 has a presence in, or near, many airports in the UK. I suspect that some of the 100 net new stores it plans to open in 2021 will be based at travel hubs. The likelihood there’ll be many more people taking staycations this year also bodes well for sites at service stations. 

Another reason for being optimistic is news the FTSE 250 baker will shortly be trialing two new vegan products, a sausage bap and a ham and cheese baguette. This should provide another boost to Greggs’ bottom line if they can replicate the success of its vegan sausage roll in 2019 and vegan steak bake in 2020. Investors may buy in anticipation, raising the Greggs share price higher. 

Third, the lack of reaction to the company reporting its first annual loss since listing in 1984 suggests people are willing to cut the £2.4bn-cap some slack.

Even the remark that profits wouldn’t return to pre-Covid levels until 2022 “at the earliest” doesn’t appear to have shaken conviction. This shrug of the shoulders from the market should put support under the Greggs share price. In fact, any indication whatsoever that it may have been too conservative on the speed of its recovery could see the stock rocket in value. 

Risks 

Of course, nothing can be guaranteed. Like all companies, Greggs still faces a number of uncertainties going forward.

Chief among these is the potential for a significant third wave of the coronavirus. Yes, the vaccination programme has been a huge success, so far. However, the possibility of a new variant hitting the shores mustn’t be dismissed.

Greggs’s digital offering should cushion some of the blow if this were to happen. Then again, it’s unlikely to prevent the company’s share price from falling, along with everything else in the UK-focused index.

Just how many people go back to their normal routines once restrictions are fully lifted is another unknown. Greggs earns a lot of money from office workers. The possibility that many businesses will encourage staff to work at home more often wouldn’t be ideal. Uncertainty over the impact of higher unemployment levels could also weigh on sentiment.

Bottom line

Full-year numbers are due mid-May. As things stand, I suspect we could see further positive momentum to the Greggs share price next month and beyond. That said, I’ll remain diversified elsewhere, just in case. 

The post 3 reasons why I think the Greggs share price will push higher appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Greggs. 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.