Broker tips: Wizz Air, Trainline

Analysts at Berenberg raised their target price on budget airline Wizz Air from 4,800.0p to 5,000.0p on Friday, stating the group was on track to bounce back from the Covid-19 pandemic better than ever.

Berenberg highlighted that through a difficult quarter, Wizz management maintained its conviction in doubling the airline's size in five years.

During that period, Berenberg expects to see earnings improve at a compound annual growth rate of 10%, despite setbacks stemming from the Covid-19 pandemic, and also stated that Wizz Air now offers "the quickest near-term recovery" in its airline coverage.

"Its sole-provider positions offer pricing protection as demand returns, softening the risk of discounting against competitors to drive passenger volume. The airline remains opportunistic with airports. This has meant a tilt towards western Europe in recent months, but management suggested commitment to central and eastern Europe," said the analysts.

The German bank also nudged its near-term estimates slightly higher after a third-quarter performance that was "modestly ahead" of its expectations and kept its 'buy' rating on the stock unchanged.

Barclays downgraded its stance on shares of Trainline on Friday to 'underweight' from 'equalweight' and trimmed the price target to 360.0p from 365.0p after a late bounce in 2020.

The bank said it has been cautious on Trainline for some time. It argued that the market is not putting enough weight on risks from the pace of a recovery in train volumes and regulation.

"To be clear, we aren't suggesting the upcoming government study will be a disaster for Trainline; our base case is that it is high-level and does not have a dramatic impact," it said. "But in the long term, we simply struggle to put a marketplace-type multiple on a business that, thanks to Covid-19, is now an intermediary in a regulated industry that loses money with essentially one end-backer, the government."

Barclays said Trainline adds significant value with its technology and has an impressive consumer product, but the bank doesn’t believe this is enough "to sustain margins in perpetuity".