Peel Hunt has issued a cautious Buy recommendation for Hungarian no-frills airline Wizz Air Holdings PLC (AIM:WIZZ), despite the headwinds currently facing the airline operator.
It issued a target price of 4,700p for Wizz Air’s shares in a broker note this morning, which were trading at about 2,347p at midday on Thursday.
Wizz Air’s share price fell by 6% on Thursday morning and has dropped 20% in the past five days.
“The current environment is extremely challenging for Wizz Air,” Peel Hunt analyst Alexander Paterson said in a broker note on Thursday.
“However, we do not expect this environment to remain indefinitely, although it may remain in place for the next 12 months at least.”
Paterson warned that Wizz Air is only “15% hedged” for fuel price rises in 2023 “at an average price of $1,056 compared to a spot price of over $1,350”, adding the group is pivoting away from Ukraine and Russia air travel.
Wizz Air said in its trading update yesterday that it was “partially hedged over the summer providing partial protection against fuel price surges” and that it would consider hedging against fuel increases for the full year.
The airline operator posted revenue of €1.66bnn for fiscal year 2022, in line with its guidance, together with an operating loss of €465mln and a net loss of €643mln, which was also consistent with guidance.
It has ordered up to 192 new aircraft to add to its fleet and recruited more than 2,200 staff in the past year, amid supply shortages that continue to hamper the flight industry.
The airline said it is planning an up to 40% growth in capacity in the first half of fiscal 2023, expecting passenger loads to hit between 85% and 90% for the period.
“At the start of F23, we stand ready to deliver our largest ever summer flying programme and the fastest growth in the industry, enabled by more than 6,000 colleagues across the business,” said Wizz Air’s chief executive József Váradi.
The company has not provided further financial guidance, except for anticipating a loss for the first quarter.