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Wizz Air share price: What’s next for the budget airline stock?

by | Last updated 26 Nov, 2022 | Consumer Discretionary

Key Points

  • Rising fuel costs paired with proposed European legislation of carbon taxes are dragging the Wizz Air share price down.
  • Passenger capacity is growing at a double-digit rate as the firm recovers from Covid-19 disruptions.
  • Still reporting massive multi-million Euro losses resulting in rising debt levels.

Wizz Air (LSE:WIZZ) is a Hungarian ultra-low-cost carrier with a fleet of 153 ultramodern Airbus A320 family aircraft. With a market cap of £2.47bn, the Wizz Air Share Price is currently trading at 2,051p.

The stock suffered a huge blow in February this year. After trading at around 4,701p shares quickly plummeted, wiping out more than 60% of the group’s market capitalisation in a year. But is this just a temporary tumble? Let’s explore, what’s next for the budget air travel stock.

What’s next for the Wizz Air share price?

Despite the pandemic-induced difficulties, Wizz Air came out strong. In fact, its continuously expanding strategy has made it Europe’s third-largest airline.

Predicting the future has become nearly impossible for all airline companies. However, the management of Wizz Air is clear about focusing on sustainability in the coming years. Therefore, it’s investing in jets that will decrease both its carbon footprint and its average fleet age. As a result of this strategy, fuel consumption is expected to decrease by 20% to 30%. And with oil prices sending fuel costs through the roof, this optimisation can’t come soon enough.

Recently, the airline shared its annual results for its fiscal year ending March 2022. Unsurprisingly, Wizz Air remains in unprofitable territory. But that may soon change. The airline carried 27.1 million passengers during the 12-month period versus 10.2 million a year before. As a result, the load factor has improved to 78%. This led to a whopping 125% surge in revenue, and a subsequent 90% jump in underlying EBITDA.

In my opinion, the strategic plans of expansion, coupled with the sky-high growth of the airline will accelerate the Wizz Air share price up.

What could go wrong?

As the aviation industry rebounds, Wizz Air has shown commendable performance. Despite the recovering metrics, the firm still posted a loss of €642.5m. Due to dysfunction in the supply chain, Wizz Air had to acquire extra resources resulting in a spike in unexpected expenses.

Meanwhile, with the previously mentioned jump in fuel prices, the group is beginning to offset its costs onto customers with higher ticket fares. With the upcoming holiday season, the timing seems deliberate. But with other airlines to choose from, passengers may decide to simply book elsewhere.

That’s not exactly a recipe for continued growth in my experience. And could easily explain the downward trajectory of the Wizz Air share price recently.

Should I invest in Wizz Air shares?

As a passenger seeking the cheapest flights across Europe, Wizz Air is likely to be my best bet, even with the planned price hikes. But as an investor, I have to consider other things.

Management’s plans for the current fiscal year make me very optimistic about its growth. Assuming targets are met, flight capacity could start climbing by high double digits before the end of the year. Pairing that with the restoration of its fleet, sets the stage for continued business growth. And that’s despite the tragic conflict in Ukraine disrupting Eastern European air space.

Personally, I believe the worst has passed for Wizz Air and its share price. While short-term volatility may continue to apply downward pressure, the underlying company looks to be back on track. That’s why I’m considering adding some Wizz Air shares to my portfolio today.

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Saima Naveed does not own shares in any of the companies mentioned. The Money Cog has no position in any of the companies mentioned. Views expressed on the companies and assets mentioned in this article are those of the writer and therefore may differ from the opinions of analysts in The Money Cog Premium services.

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