Down 50%, is the Wizz Air share price now a screaming buy?

Andrew Woods takes a look at how the pandemic has affected the Wizz Air share price and questions whether it now presents incredible value.

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The Wizz Air (LSE:WIZZ) share price has been volatile recently as air travel has struggled to recover from the pandemic-related demand shock. With the shares now down 50% in the last six months, is it finally time to load up at such a low price? Let’s take a closer look. 

Some challenges

Like many other airlines, Wizz Air was pummelled by the pandemic. Border restrictions meant that the majority of scheduled flights were cancelled.

Given that the firm’s base is in Hungary, the outbreak of war in Ukraine also caused the shares to plummet. Many investors believed that this event would materially impact the company’s ability to fly.

More recently, there have been concerns regarding how rising oil prices will affect the business. This trend has resulted in climbing jet fuel prices and, given that Wizz Air suspended its hedging policy for a period, rising costs have dented recent balance sheets

All of these factors have weighed heavily on the firm, but things now seem to be starting to recover.

In recent months, the company completed a deal with Airbus to purchase 102 additional A321 aircraft. These will be delivered over the coming years, but this is an early indication that Wizz Air is once again focused on expansion and maintenance of its fleet of aircraft.

Calmer skies ahead?

There are other, arguably more important, metrics by which to gauge the health of an airline, however.

These include passenger statistics and load factors. The first obviously tells us the number of passengers who travelled, while the second shows what proportion that number is of the total number of available seats.

Wizz Air releases monthly passenger number reports. For September, it carried around 4.57m passengers. This represents a 51.5% increase compared to the same period in 2021.

Furthermore, the load factor for September was 87.1%. This suggests that the firm also now has more planes in the sky. 

The company announced that it’s expanding operations into Romania. This could be an opportunity to tap into a market that still may be underserved by other airlines. 

Like the purchase of new aircraft, the move into Romania gives me confidence that Wizz Air is beginning to think about growth, instead of being focused on survival during the pandemic.  

With an operating cash flow of £1.1bn, the business should also be able to respond to any challenges that may arise in the short term. 

Overall, the airline has endured a difficult period over the last couple of years. While it’s not out of the woods yet, it seems that things are starting to take a more positive turn. The fall in the share price is significant and may present value. 

However, I would like to see further recovery in the travel sector, and consistently improved passenger statistics, before I think about buying the shares.

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.

Andrew Woods has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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