UBS initiates coverage of Wizz Air at 'buy'

UBS initiated coverage of Wizz Air shares at ‘buy’ with a 2,200 price target, noting that the company has a strong track record of growing traffic and profits.

The bank said Wizz's market focus on Central and Eastern Europe offers structural growth. The broker´s analysts highlighted the attraction of continued cost control, an interesting mix of ancillary and seat revenues, strong cash flow generation and free cash flow yield, as well as an attractive valuation versus peers.

It said that despite Ryanair being a strong competitor in a number of CEE markets, Wizz has grown profitability and is now the largest CEE airline with a 39% market share. In addition, it said Wizz is only second to Ryanair in terms of cost of production with a number of initiatives to drive costs down.

“We believe Wizz can maintain a low production cost given cost initiatives, further operating leverage from traffic growth and falling fuel price coupled with increased fleet efficiency."

UBS noted that since listing in the first quarter, the shares have risen over 50% despite a challenging share market.

At 1500 BST, Wizz shares were down 0.1% at 1.768p.