Berenberg raises target on Wizz Air, praises 'superior' growth prospects

Analysts at Berenberg hiked their target price on shares of budget airline Wizz Air from 3,700.0p to 4,000.0p on Friday, telling clients that the airline's stock continued to reflect its "superior" growth prospects.

Berenberg said constrained capacity in the European short-haul market had led to "a broad re-rating" of low-cost carriers on pricing exuberance and although Wizz operated in more isolated Central-Eastern Europe markets with higher GDP growth, its higher capacity growth facilitated less near-term margin momentum than the analysts expect from its peers.

"Wizz still offers attractive exposure to its more isolated and faster-growing CEE markets, compared with mature western European airline networks," said Berenberg.

The German bank said this exposure "should" guard it against pricing pressure if market capacity reaccelerates.

Berenberg also pointed out that Wizz Air's network overlap with Ryanair had increased as Vienna Airport had grown, a trend that was likely to continue through the carrier's planned Vienna and Krakow growth.

As such, Berenberg expected its growth to increase price competition between the two airlines, leading the analysts to retain their 'hold' rating on Wizz.

The analysts also stated that Wizz's third-quarter results were "fine", with net income coming in slightly ahead of consensus estimates of €16m, while revenues were in line at €673m.

"Wizz Air trades on a P/E of c15x our year-forward estimates, a fair multiple, in our view, that reflects its superior growth outlook and higher ROIC, while factoring in near-term unit cost pressures."