Berenberg lowers target price on Wizz Air
Analysts at Berenberg cut their target price on low-cost European carrier Wizz Air on Thursday based on fuel and currency headwinds.
Berenberg said that, in its view, Wizz Air's current share price already factored in a sizeable cut to its full-year guidance. With shares down 19% over the past month, a decline "even worse than easyJet and Ryanair", the broker feels the airline's current share price discounts "a reduction in guidance of c20%".
"We believe the market has extrapolated Ryanair and easyJet's company-specific challenges; we find such weakness unlikely at Wizz," said Berenberg.
The broker stated that Wizz had avoided tough comparable periods on one-time pricing benefits, as experienced by easyJet, and booking weakness due to strike disruptions, which has affected Ryanair's yield outlook.
Noting that concerns about a profit warning had likely held back would-be buyers, the German broker said that this fear offered a "considerable upside for investors" as it reiterated its 'buy' rating on Wizz.
Berenberg's principal reason for dropping its target price on the airline from 4,000p to 3,800p was its move of marking fuel and currencies to market.
The broker expects an incremental increase to fuel costs of roughly €16m throughout 2019, leading it to cut its full-year EBITDAR estimates by 2.5% and to lower its DCF-led price target to 3,800p.
"On higher fuel costs, we now assume more disciplined growth to protect high margins."