Broker tips: Ryanair, 888 Holdings

JPMorgan Cazenove placed Ryanair on ‘positive catalyst watch’ on Thursday ahead of the airline’s capital markets day on 5 September, as it expects it to highlight the strengths of its business model and how it might achieve a circa 30% intra-European share by 2034.

At the CMD, JPM expects Ryanair to focus on the longer-term growth story out to 2034 following its new 300 aircraft Boeing order in May.

"As the No.1 carrier by market share in intra-Europe (a position that has increased during the pandemic), the over-arching question going forward for the story is ‘where does future growth come from?’, over and beyond growing in line with the market," JPM said.

"In our view: (1) There is little scope for new markets for Ryanair in Europe. However, we see opportunities for expansion in Domestic Spain, and in large W. European International markets such as the UK, Spain and Germany. (2) That means taking share off incumbents (unless Ryanair is able to stimulate new demand on currently unserved routes)."

JPM estimates that legacy carriers still occupy the No.1 position in 43% of Ryanair’s markets, the majority of which are not the largest listed carriers.

The bank said it was not making any estimate changes and kept its ‘overweight’ rating on the shares and €24.50 price target.

Berenberg has reiterated its 'buy' rating for 888 Holdings despite the betting and gaming group disappointing the market with its recent first-half results, saying the company is "ready to de-lever" under its new chief executive officer.

Revenues and earnings came in below expectations for the six months to 30 June, with 10% growth in UK monthly active users but 1% growth in the international division due to compliance changes in certain unregulated markets and a slower recovery in the Middle East.

888 announced at the end of July that Per Widerström would be joining the group in October as its new CEO, replacing Jon Mendelsohn who has been the executive chair since Itai Pazner's departure in January. Mendelsohn will return to a non-executive chair position when Widerström joins.

Meanwhile, net debt reduced by £68m to £1,660m, with leverage reducing from 5.6x at the end of 2022 to 5.1x by the end of June. Meanwhile, the company delivered £66m of cost synergies in the first half, and said £150m of synergies expected in 2025 will now materialise one year earlier.

"These factors, aided by the appointment of a CEO with a proven track record, provide us with further confidence in 888’s ability to deliver a continued reduction in leverage," Berenberg said in a research report on Thursday.

The broker has given the stock a target price of 190p, suggesting significant upside from the current price of 129.3p, up 3.4% on the day.

In valuation terms, Berenberg said 888 trades at just 5x consensus 2024 EBITDA forecasts.