Key points:
- Wizz Air to update the market on Wednesday
- Wizz Air shares are down 62% in 2022
- The company is JPMorgan's most favoured European carrier.
Wizz Air (LON: WIZZ) is the latest airline to update the market on its recent performance when it reports its first-half fiscal 2023 results on Wednesday, November 2.
The carrier’s shares have suffered, like most airlines, over the last few years, down more than 62% in 2022 and 65% in the last 12 months. However, it did manage to gain 10% in the last week, closing at 1,611p on Friday, and currently up 4.8% Monday.
As well as the substantial Covid challenge airlines faced, they have also had to deal with the after effects, with soaring inflation and labour shortages posing issues in 2022. While inflation could still pose a potential issue to demand, Wizz Air could run into further issues in the near term, with reports that ground staff at Luton airport could go on strike this Christmas.
Also Read: Best Airline Stocks to Buy
In its first quarter FY 2023 release, Wizz Air said, “passengers and revenue more than quadrupled versus the same quarter last year, up almost 20% versus pre-pandemic levels, with 30% more capacity operated.” Still, its unit costs for the quarter were around 40% higher compared to pre-pandemic levels, driven mainly by commodity inflation. In addition, its operating loss of €285 million was impacted by USD strength.
In brief comments looking ahead to Q2, Wizz said during Q1, it invested to re-establish its “proven pre-pandemic operating model” and is seeing the results of the investment already through Q2 and expects to deliver a material operating profit as “revenue and pricing momentum continue to improve.”
The momentum mentioned is something we have seen in recent updates from other airlines. Most recently, on Friday, IAG reported positive third-quarter results and said all its airlines were significantly profitable, and it is continuing to see strong passenger demand. Meanwhile, in its trading update for the year ended September 30, EasyJet said demand was and remains strong, suggesting Wizz Air will report similar.
Analyst Ratings
Last week, Fitch Ratings revised Wizz Air’s outlook to negative. This was based on its expectation of Wizz Air's delayed deleveraging as “margins are under pressure on the back of the worsening economic outlook and the rising cost base, including labour and fuel – the latter exacerbated by unfavourable foreign-exchange movement.” Fitch also said macroeconomic instability, coupled with high inflation in Europe, could suppress Wizz’s demand recovery.
In contrast, JPMorgan lowered the firm's price target on Wizz Air to 3,050p from 3,900p but kept an Overweight rating on the shares. In a recent note, JPMorgan analyst Elodie Rall told investors that they expect airlines to report a strong Q3 due to high fares. Meanwhile, looking forward, for low-cost carriers, they “see a potential perfect storm of high fuel, strong $ and a potential consumer squeeze.” In addition, Wizz Air was the firm’s most favoured carrier.
Overall, according to TipRanks, out of seven analysts to give Wizz Air a rating, three have assigned the stock a Buy rating, three have Hold ratings, and one analyst has a Sell rating. The average price target is 2,532.14p per share.
