Model update – Q4 KPIs out, we are confidently bearish

• We fine-tuned our model ahead of the FY23 report, which is scheduled for the 8^th of June. We are confidently bearish on the stock, thus we reiterate our Sell recommendation. We expect that the overhype around peak summer travel trends and increasing ticket prices will sooner or later evaporate as we have been going into a seasonally weak Q2-Q3 period for airline stocks. In particular, estimates are elevated for FY24, predominantly driven up by positive comments from the management, rivals and other industry experts. However, we doubt that Wizz can deliver pre-pandemic profitability anytime soon after a historic scale up. We are concerned that the fleet can be utilized at similar efficiency compared to the pre-covid era. In addition, the global macro has deteriorated materially in the shadow of the banking crises, while central banks are struggling to tame inflation. Consequently, the stock is far from being an attractive play for a LT investor at these elevated share price levels. The stock is overvalued as it trades around 30% higher compared to our 12m TP of 20.6 GBP/sh.
• On 3^rd of April, Wizz posted KPIs for March so we have got a cleaner picture on how the carrier evolved during the quarter. Wizz continued to offer longer flights (we estimate c.1,810km vs. c.1,640km pre-covid), but flew less sector on a daily basis (c.3.9x vs. 4.8x flights per a/c a day). This is a very significant difference vs. pre-pandemic levels, but a consequence of the growing proportion of the Middle East traffic. Since these markets (Abu-Dhabi, Saudi Arabia) are now maturing, it may take further 1-2 years to bear fruits.