After H1 earnings, is the Wizz Air share price set for a comeback?

With passenger numbers starting to improve, could the airline’s latest trading update mark the start of a turnaround for the Wizz Air share price?

| More on:
Aerial shot showing an aircraft shadow flying over an idyllic beach

Image source: Getty Images

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.

The Wizz Air Holdings (LSE:WIZZ) share price climbed after the result of the US election on Wednesday (6 November). But the company’s H1 earnings have sent the stock back down. 

Nonetheless, the issues the business has been dealing with are familiar ones and there are clear reasons for optimism. So is the stock too cheap to ignore?

Results

In general, there are two things that airlines don’t like. The first is running flights with unused capacity and the other is having aircraft that aren’t being used at all. 

Over the six months between April and September, Wizz has been dealing with both. As a result, it’s not a big surprise that the latest trading update wasn’t especially positive. 

Revenues increased slightly compared to the previous year, but operating profits fell 33%. Yet to some extent, investors shouldn’t have been surprised by this. 

The firm’s engine issues were already known about and the airline releases its passenger data monthly. More importantly though, there are positive signs going forward.

Reasons for optimism

Wizz isn’t responsible for the engine issues that meant 41 of its 220 or so aircraft were out of service at the end of September. And it is entitled to compensation for this. 

So far, that hasn’t offset the reduction in operational capacity. But the company is looking to renegotiate its settlement with Pratt & Whitney, which manufactures the engines for its planes.

On top of this, load factors – the percentage of available seats that are sold – improved during October. Wizz managed around 93% capacity, which is much closer to normal levels.

Both of these are reasons for thinking the business might be through the worst of the recent challenges. So should investors consider this a potential buying opportunity?

A buying opportunity?

The Wizz share price is near its 52-week low, but I don’t see this as a particularly attractive stock. I think the business is facing too many challenges that are out of its control.

The conflict in the Middle East is a good example. Wizz has been trying to innovate with low-cost flights to the region recently, but the political situation has been weighing on demand.

There’s not much the firm can do about this. And the impact that reduced passenger numbers can have on airline profits makes this a bigger concern than it might otherwise have been.

It’s natural to think that things are set to improve from this point – and that might be true. But over the long term, I think the risks outweigh the rewards from an investment perspective.

Short interest

One last thing is worth mentioning. Wizz shares have been attracting the attention of short-sellers recently, especially after the weak load factor data from September. 

This means the stock could climb sharply if things improve – a rising share price might force short-sellers to close their positions. That’s worth noting, but it’s not enough for me to buy.

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.

Stephen Wright 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.

More on Investing Articles

Investing Articles

What’s going on with the BT share price? Analysts say it’s undervalued

The BT share price has demonstrated plenty of volatility in 2024. Dr James Fox explain why this is and what…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

3 FTSE 250 stocks I’m considering buying for the long run

Our writer Ken Hall takes a look at three FTSE 250 stocks across different industries that he considers to be…

Read more »

Young female couple boarding their plane at the airport to go on holiday.
Investing Articles

Up 75%! But is the IAG share price likely to crash in 2025?

The International Consolidated Airlines (IAG) share price has gone parabolic recently, but here's the potential danger ahead.

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

2 FTSE 100 shares with strong growth prospects for 2025

Sometimes the best growth prospects aren’t in the most obvious stocks. Stephen Wright looks at two FTSE 100 firms he…

Read more »

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

Which Coca-Cola shares are best for dividend investors to consider?

When it comes to Coca-Cola shares, dividend investors are spoilt for choice. But what’s the difference between the UK-listed stocks…

Read more »

Young Caucasian girl showing and pointing up with fingers number three against yellow background
Investing Articles

3 ISA mistakes I made

Learning from others’ mistakes is one way to make sure you don’t make the same ones. Here are three ISA-related…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

A £10,000 investment FTSE 100 banks at the start of 2024 would be worth this much now

FTSE banks have been one of the brightest sectors on the blue-chip index this year. Dr James Fox takes a…

Read more »

Investing Articles

Forget short-term pain! 2 dirt cheap UK stocks to consider for long-term gain

The London stock market remains packed with bargains at the end of 2024. Royston Wild discusses two of his favourite…

Read more »