Investec downgrades Wizz Air on valuation despite growth opportunity

The brokerage said Wizz has performed "extremely well" operationally, with first-half passenger growth of more than 23%.

"We continue to believe that unit costs will fall over time and that the robust balance sheet and net cash positon of around €1bn can be deployed to bring down aircraft ownership costs. Wizz Air is also likely to be a beneficiary of further consolidation in the European airline industry and any network cuts arising from insolvent carriers."

Investec said it expects strong first-half results in November and has lifted its forecast passenger numbers by 1.7% and revenue estimate by 1.6% to take into account robust passenger growth and load factors. The brokerage forecasts FY18 net income of €277.5m, slightly ahead of company guidance of €250-270m. It lifted its price target on the stock to 3,300p from 3,100p.

It also noted Wizz's recent application for an air operator's certificate and operating licence in the UK to make sure it can continue to operate in the country after Brexit.

"We believe the company will be interested in acquiring slots from Monarch at both Gatwick, Luton and Birmingham and could be a significant beneficiary if Alitalia and Air Berlin have their route network into Central and Eastern Europe cut by new owners or their administrators."

At 1140 BST, the shares were down 0.5% to 3,216p.