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Wizz Air's stock nosedives after Q3 earnings

Wizz Air’s share price fell after it delivered a less optimistic outlook than its rivals for 2023. In Q3 earnings published last week, the Hungarian-based carrier forecast a return to profit in its next financial year. However, there is a sense of optimism around Europe’s low-cost airlines as passengers look to escape to the sun after the pandemic all but grounded the travel industry. 

Wizz Air’s share price nosedived 9% Thursday following the publication of Q3 results for the fiscal year 2023. The stock had closed higher the previous day, lifted by rival easyJet’s [EZY.L] updated guidance. Wednesday had seen easyJet’s share price lift more than 10% Wednesday afternoon after it raised its full-year profit outlook thanks to bumper January bookings.

In the results, Wizz Air [WIZZ] forecasted that next year would be profitable. Helping the Hungarian-based operator is an uptick in the number of passengers over the winter and a narrowing of operating losses. However, it remains cautious regarding exactly how good summer business will be.

Losses narrow Wizz Air’s Q3 earnings

In the final three months of 2022, Wizz Air’s operating losses narrowed to €155.5m, down from €213.6m in the same period last year. Revenue more than doubled to €911.7m, up from €408.4m in the same quarter the previous year, with passenger numbers up 60% to 12.4m. The low-cost carrier said that it had hit a high for the number of passengers flown in any 12-month period in its eighteen-year history.

Dragging on finances were fuel and foreign exchange costs, which were unhedged for much of 2022.

The airline said it benefited from operational adjustments that contributed to significantly lower flight disruption.

CEO József Váradi said that at the end of January, passenger volumes were coming in ahead of 2022 levels. Váradi added that Wizz Air expected to make a net loss for the full year 2023 but was confident that the next year would be profitable, saving any pandemic or geopolitical event.

This marks a contrast from Ryanair [RYA.IR] and easyJet, which have reported record summer bookings. When asked about Wizz Air’s bookings, CEO József Váradi said: “Bookings are strong, but I don't want to get over-excited,” reports Reuters.

European airline stocks fly higher as passengers return

Wizz Air’s share price is up over 43% since the start of the year and up over 110% since the lows hit mid-October, closing Friday, 27 January, at 507.2p. Rival easyJet had climbed even higher, up 58% since the start of the year, while Ryanair’s share price was a little lower with a 27.11% gain.

Fuelling optimism in Europe’s low-cost carriers has been a return in passenger demand, along with higher revenues, after the pandemic grounded the industry at the start of the decade.

Ryanair reported a record 4.95m in bookings for the second week of January, the highest level in its 30-year history. Ryanair boss Michael O’Leary said that there were “no signs” of the economic slowdown hampering demand, with unemployment still being low and customers having saved during the pandemic. However, O’Leary did caution that a flare-up in the Ukraine-Russia conflict or a resurgence in Covid-19 could hamper demand.

Global aviation is set to return to pre-pandemic levels by June, propelled by the reopening of China, according to a report from jet-leasing company Avolon. The report points out that there was a 70% recovery in passenger traffic last year, led by demand in Europe and North Africa.

But the collapse of privately-held Flybe at the end of last week could dampen sentiment. The airline operated services from Belfast, Birmingham and Heathrow to airports in the UK, Amsterdam and Geneva.

Negative press for Wizz Air could also hurt investor confidence. Some turbulence was experienced in December when the Civil Aviation Authority slammed the airline for “unacceptable” behaviour as its passengers are more likely to escalate complaints. Wizz Air’s slow complaints processes also raised concerns for the regulator. Wizz Air’s share price dropped 6.02% on the day the news came out.

Among analysts, Wizz Air’s stock has a 3,068.12p median price target. Hitting this would see a 12% upside in the share price. One of the more optimistic price targets is Deutsche Bank Aktiengesellschaft’s 3,150p target.

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