Wizz Air’s (LSE: WIZZ) share price has had a bumpy ride in the past couple of weeks. On 24 July, it lost 13% from its daily high to its daily low on a mixed bag of Q1 2025 results.
The day after, it rose 12% from its daily low to its daily high after a bank upgrade.
To work out where it might go from here, I looked at both price catalysts in greater depth. I then re-examined the underlying business and ran some key valuation numbers.
Down…
I think that the Q1 results contained several positive elements.
One of these was revenue rising 13.4% year on year to €1.428bn (£1.24bn). Another was earnings before interest, taxes, depreciation, and amortisation increasing 9.3% to €300.2m.
That said, in Wizz Air’s case, depreciation and related costs associated with grounded aircraft weighed on its operating profit. This dropped 38.3% to €27.5m, against analysts’ forecasts of €87m.
As of 30 June, the airline had 41 aircraft grounded due to engine-related troubles. And this remains a key risk to the firm, in my view. Indeed, Wizz Air has stated that its grounded planes will not return to the air until 2027.
…and then up again
Yet Barclays — and I — believe better times are ahead for the airline. The day after the Q1 results, the banking giant upgraded Wizz Air to Overweight. The new rating indicates that it expects the stock to outperform its sector.
Barclays cited a “far brighter future” for the airline based on its strong position in the Central and Eastern European market.
This accords with the firm’s strategic realignment that saw it suspend its Middle Eastern operations on 1 September to focus on Europe.
Moreover, the consensus analyst forecast is for Wizz Air’s earnings to increase by a very robust 18.9% annually to the end of fiscal year 2028.
And it is ultimately this growth that powers any company’s share price (and dividends) over time.
So where could the share price be going?
Discounted cash flow analysis identifies where any stock price should trade, derived from cash flow forecasts for the underlying business.
For Wizz Air, this modelling shows its shares are 74% undervalued at their current price of £12.44.
Therefore, their fair value is technically £47.85.
Secondary confirmations of a major undervaluation here come from comparative stock measures.
For instance, on the key price-to-earnings ratio, Wizz Air’s 5.6 is bottom of its peer group, which averages 7.9. These firms comprise International Consolidated Airlines Group at 6.8, Jet2 at 7.6, Singapore Airlines at 8.3, and easyJet at 9.
It is also very undervalued on its price-to-sales ratio of 0.3 against its competitors’ average of 0.7.
Will I buy the stock?
Aged over 50 now, I focus on stocks that pay a dividend yield of at least 7%. As Wizz Air pays no dividend currently it is not for me.
However, given its strong earnings growth prospects, I think it is well worth considering for investors whose portfolios it suits.
