Wizz Air - Desperate times create buying opportunities
Wizz Air has to face severe issues in the coming quarters regardless the
outcome of the Russia - Ukraine war. Having said that, we double-upgrade Wizz
Air to BUY from Sell with a TP of 32.5 GBP/sh as we see that the market fully
priced out the carrier’s long-term growth story and competitive edge. Our new
TP implies a 29% upside potential as of writing.
We have witnessed a complete washout over the last couple of weeks similar to
the freefall in Febr/Mar 2020 as shares in Wizz Air have plunged 50% since early
February. Though the Company may have to reposition itself to reduce its
exposure to the CEE region whether or not the Russia/Ukraine geopolitical
tension to be resolved, we remain constructive on the Company’s long-term
cost advantage as shares trade at attractive levels. Despite rising oil prices
having a negative impact on fiscal 2023 earnings, this may soon accelerate
market consolidation, in our view, as hedges at rivals run out over time. At this
stage, we think that the market is pricing a bad (not the worst!) case scenario,
but sentiment could quickly turn positive once the dust settles.
Wizz Air trades at a discount vs. its closest peers, however, we think that we are
ahead of a series of downward earnings revisions. Wizz Air trades at a FY2 P/E
of 7.0x (vs. 5Y FY2 hist. median of 10.7x) and an EV/EBITDA of 4.1x (vs. 7.4x),
based on BBG consensus, well below its historic median valuation. However,
Wizz trades at a P/E, based on our FY24E EPS, of 14.3x. Wizz also trades on a
16% discount vs. Ryanair’s FY2 P/E of 8.3x.
Wizz Air Holding is a European airline. As of Mar 31 2017, Co. provided more than 500 routes from 28 bases, connecting 141 destinations across 42 countries. Co. has two reportable segments: the airline and the tour operator business units, marketed under the Wizz Air and Wizz Tours brand names, respectively. Wizz Air sells flight tickets and related services to external customers and, to an extent, to Wizz Tours. Wizz Tours sells travel packages to external customers covering the network of Wizz Air.
Concorde Securities Ltd. is Hungary’s leading independent company engaged in investment banking activities. It provides its clients with integrated financial services, including securities trading, research, corporate financing advisory, capital market transactions, wealth management and investment advisory. The operational management of the company is the responsibility of the CEO, while the owners/managers (who control one-third of the company through their shares and options) are in charge of its strategic governance. Concorde Securities Ltd. is a member of the Budapest, Frankfurt, Warsaw and Bucharest stock exchanges, as well as of the Hungarian Association of Investment Service Providers.
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