WOOD Flash – Wizz Air: 1Q FY25 – a series of unfortunate events
Following the results announcement this morning (1 August), Wizz Air tanked to around GBP 16/share. The stock now appears to be trading at around 5-6x on this year's and c.5x on next year's EV/EBITDA, if we try to factor the deterioration of the outlook into our estimates. Historically, Wizz has traded at around 7-8x. However, this is also true for Ryanair, which has also been trading cheaper lately (currently at around 5.4x on the 1YF consensus estimates). Currently, Wizz's market cap is around one-third of its EV, which makes its equity story that of a classic high-beta airline. If the growth resumes, and if the profitability returns to the pre-pandemic levels, the operating and financial leverage combination could drive material upside to our PT, eventually. We believe that Wizz still has what it takes to generate attractive returns, while ferrying people in and around Europe. However, we see an increasing risk that FY25E could prove to be yet another year to forget. We see downside for our estimates. With demand headwinds, costs and profits affected by groundings, and limited visibility on how Wizz plans to keep the ex-fuel CASK growth in check, this does not seem like the right backdrop for a near-term rally.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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