Berenberg upgrades Wizz Air to 'buy'

Analysts at Berenberg upgraded low-cost carrier Wizz Air from 'hold' to 'buy' on Tuesday, stating the group was "playing the long game".

Berenberg said Wizz Air had hopped from one crisis to the next over the past eight months, with challenges ranging from its outsized exposure to the highest fuel prices in over a decade, after the group stopped hedging fuel in 2021, to the war in Ukraine.

"Positive sentiment towards the shares has been hard to come by," said the analysts.

However, regardless of how short-term issues were managed, Berenberg does not think they reflect "the long-term potential" of the business.

The German bank noted that while the near-term operating environment may be "undeniably challenging", it reckons the market more than reflects this, with the shares now roughly 60% below their 2021 peak.

"For those willing to look through the next 12-24 months, which are likely to be challenging, Wizz's valuation looks particularly compelling. The shares are now trading on a P/E of just 5.7x our FY 2025E (to March year-end), compared with a 2016-19 median of 13.4x and minimum of c8x respectively," said Berenberg, which also lowered its target price on the stock from 3,500.0p to 3,300.0p.

Reporting by Iain Gilbert at Sharecast.com