Turnaround is distant, but shares are overly punished

We have significantly reduced our forecasts following Wizz Air’s early June financial report, which fell short of expectations. Moreover, the company published guidance for next year that also came in below expectations for key performance indicators. The stock’s poor performance comes as no surprise, as a growing number of investors are questioning the credibility and preparedness of the management. We have lowered our target price from 22.1 GBP to 17.0 GBP, while maintaining our Buy recommendation. Our medium-term Buy recommendation assumes that a capital increase is unlikely, as cash flow could remain positive over the next two years despite the current struggles. However, in the short term, the lack of positive momentum may keep volatility high in the stock. Any further deterioration in the external environment, such as a strengthening USD, rising oil prices, geopolitical escalation, or weakening consumer confidence, could have a highly negative impact on our forecasts. Margins have become so thin relative to fleet size that our profit forecasts for this and next year could easily turn into losses under adverse developments.