The Wizz Air share price has fallen 17%. Would I buy it now?

The Wizz Air share price has fallen in recent months, but has it fallen enough to become a buy for Manika Premsingh?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Low-cost airline Wizz Air (LSE: WIZZ) was flying high until very recently. Its share price touched all-time highs in March. But three months later, it has tumbled a fair bit. A whole 17% to be exact. 

I think this should have been expected. 

Why has the Wizz Air share price come off?

After vaccines were developed late last year, a relief rally ensued that increased share prices across the board. Notably, the share prices of companies most affected by Covid-19, like travel and retail, saw big run-ups. However, the vaccination process has been slow and the new Delta variant is also making the situation more challenging. Air travel is still slow as a result, and the UK is still partly in lockdown. 

It is little wonder then that the Wizz Air share price that rallied in anticipation has now come off a bit. A similar trend is also evident in the easyJet share price, making it clear that it is a broader trend and not one that is limited to Wizz Air alone.

Can the aviation stock pick up from here?

However, even with the fall in share price it is still up by almost 39% over the year. It makes sense for me to buy the stock only if there is a chance that it will rise more. I think that depends on how much and how fast air travel picks up. CEO Jozsef Varadi is optimistic. According to a recent Reuters report, he has said that the airline will see full recovery in 2022 both in terms of volumes and financials. 

Partial recovery is already visible. The airline is already operating at 60% to 65% of its 2019 capacity. Moreover, it expects that it will fly even more this summer than it did before the pandemic. The company has also acquired new jets to improve its performance after air travel restarts in earnest. 

My concerns

I am inclined to take this optimism with a pinch of salt. There have been way too many false starts in the past year to know for sure that air travel will well and truly take off soon. We are not out of the woods as far as Covid-19 is concerned even now. And it is reasonable to expect we may not be for the next few months. 

Would I buy the Wizz Air stock?

At the same time, here is little doubt that Wizz Air will recover eventually. But that may or may not be soon. In the meantime, the share price run-up has created a mismatch with the actual performance, which is far below its pre-pandemic levels both in operational and financial terms. Since it will take time before the airline comes back to its earlier financial health, I think that this mismatch will be addressed by investors at some point.

For this reason, I think it is more likely there will be a further decline in the Wizzair share price in the short to medium term than an increase. I will continue to wait and not buy it right now.  

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh owns shares of easyJet. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »