Be greedy when others are fearful - Q1 results and July traffic stat twist our view

Wizz Air reported solid set of results for fiscal Q1/24 today, BMO. The carrier earned net
profit of EUR 61mn in Q1/24 (vs. EUR -452mn in Q1/23), compared to the EUR 51mn
analysts had expected, and well above our estimate of EUR -1mn. Profit guidance left
unchanged in the range of between EUR350-450mn. However, the management expects a
capacity growth of 25% YoY in H1 vs. previous guidance of 30% YoY due to GTF engine
problems. The rest of the guidance is kept unchanged. Total cash balance rose to EUR
1.8bn by the end of June (EUR +0.3bn), while the net debt decreased by EUR 0.1bn to EUR
3.78bn at the end of June from EUR 3.89bn at the end of March.
 Since our initial Sell recommendation dated back to 26th of January, shares in Wizz Air has
lowered by 15%. Having said that, given the much higher than expected revenues,
outstanding load factor for July and Q1 earnings, as well as the reaffirmed profit guidance
for this year, we double upgrade Wizz Air to BUY and set our 12m TP to 40 GBP/sh (vs. our
prev. TP of 23.9 GBP/sh), implying a 70% upside potential from yesterday’s closing.
 Wizz Air trades at a 1Y fwd. P/E of 4.9x and EV/EBITDA of 4.4x, on our estimates, vs.
historic median of 12.6x and 5.2x, respectively. We expect a normalization in valuation by
the end of this year, but we also note that August and September are usually the weakest
months of a year for European airline stocks. We recommend investors to buy every dip.