WOOD Flash – Wizz Air: 3Q FY22 – strong capacity rebound amidst difficult operating environment

Wizz Air’s 3Q FY22 missed the consensus on revenues, mainly on the weaker-than-expected fare levels. The EBIT was broadly in line with the consensus and Wizz’s guidance, despite the Omicron surge towards the end of the year. In the near term, we believe that the stock’s key drivers are the pandemic and the pace of the reopening, the level of fares in the summer, the execution of the ramping up of the operations, and the level of fuel prices. The possible Russian invasion of Ukraine is a near-term risk, as are weak summer yields. The results do not change our investment thesis. The continued rollout of vaccinations, combined with the milder symptoms of Omicron, should lead the way out of the pandemic, in our view, and we expect to see a robust demand recovery in the run up to summer 2022E. While there is a risk that yields may be under pressure initially, with its industry-leading unit costs, we see Wizz as well-placed to return to profitability faster than its peers, once the environment allows for the full utilisation of its fleet and personnel. At 7x EV/EBITDA on the consensus FY23E, its valuation is attractive for the long-term growth profile the stock offers, in our view. We reiterate our BUY rating.