Wizz Air raised to BUY, TP GBP 50.0 - Good track record and increased confidence about the future
We upgrade our recommendation for Wizz Air to BUY (from HOLD) with an increased target price of GBP 50.0 per share (previously 40.50) on the back of 1) the announcement of the establishment of a new airline in the Middle East (increasing longer-term estimates), 2) a revised look at the valuation methodology, incorporating PEG multiples and focusing more on European peers and 3) new short- to medium-term assumptions based on lower fuel prices and market capacity growth due to the B737 Max production suspension (see below). Although we still see risks in the growth ambitions, Wizz Air is fundamentally well positioned in the industry (cost base, growth markets). The Abu Dhabi operation also provides exposure to new regions and potential capacity allocation options in case of unforeseen market developments in Europe, in our view.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.
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