UBS has upgraded Wizz Air to a buy rating, forecasting 50% growth in the pan-European airline’s stock over the next 12 months. The London-listed company is a low-cost airline operating from nearly 40 airports and flying to over 50 countries. It has become one of Europe’s largest airlines since its inception two decades ago. Wizz Air shares are already up by 50% this year, and UBS analysts expect the stock to increase by another 50% to £43 ($54.47) a share over the next 12 months. WIZZ-GB 5Y line “We believe that, with its cost base and focus on Central and Eastern European markets as well as new Middle East markets, the airline should continue to take market share over the next five plus years,” said UBS analyst Jarrod Castle in a note to clients on June 14. “We continue to see upside risk to our forecasts.” The Swiss investment bank expects several factors to push up Wizz Air’s stock in the near future. The bank said the company’s plans to increase its fleet by two and half times to over 450 planes by 2030 “is not without execution risk,” but could lead to substantial gains in market share in the coming years. UBS also said that a decrease in fuel price could help increase the company’s earnings significantly as Wizz Air has hedged more than half of its fuel requirements for next year, meaning it’s well placed to take advantage of a price drop. In addition, Wizz Air’s shares are currently trading at around six times the company’s estimated earnings for 2024, which UBS describes as an “attractive valuation.” Wizz’s shares are traded in London, Frankfurt , and over the counter in the United States. Despite facing obstacles such as higher debt levels due to the pandemic and a botched fuel hedging strategy last year, UBS still sees potential in Wizz Air’s business model. “While consumers are likely to be stretched, Wizz has the ability to stimulate traffic given its low cost of production, continued pent-up demand recovery and low risk frequency growth into existing markets (over 80% of growth),” Castle added. Not everyone is convinced, though. Deutsche Bank analysts raised their price target for Wizz Air to £37 but reiterated their “hold” rating on the stock. Deutsche analyst Jaime Rowbotham lowered the bank’s forecast for the number of passengers flying Wizz Air next year by 3%, in contrast to its upgraded forecast for rival Ryanair , Europe’s largest airline. “While we see a lot to like at Wizz and currently have a positive stance on the sector, we maintain our Hold rating, with more material potential upside elsewhere, most notably at Ryanair and the network airlines,” Rowbotham added.
