As the travel outlook worsens on account of consumer reluctance, short sellers are betting that a low-cost airline will fare worse than its European rivals.
Borrowed shares, a sign of short selling, make up 13 percent of Wizz Air Holdings Plc’s shares available for trading, in accordance with the newest data from S&P Global Market Intelligence, compared with lower than 1 percent for rivals EasyJet Plc and Ryanair Holdings Plc.
Skeptics cite quite a few reasons for the pessimistic bets: Wizz Air is significantly more indebted than its competitors, is scuffling with an engine problem on the Airbus SE aircraft it operates, and the Budapest-based airline flies mainly to and from Eastern Europe, which brings it near war-torn Ukraine.
The London-traded share has already fallen 41% this 12 months to 1,311 pence, weighed down by a Profit warning in August, and a few analysts imagine that price war between airlines could well lead to a different slump.
“There is a lot of uncertainty about whether Wizz can meet its full-year guidance,” said Sathish Sivakumar, an analyst at Citigroup Inc. He is considered one of five analysts tracked by Bloomberg who rate the stock a “sell” rating – a stance he has held since October last 12 months.
A spokesman for Wizz Air declined to comment on the pessimistic bets on the stock.
The wearer is considered one of those that hit hardest on account of engine problems that required the Airbus A321 to be taken out of service early. With the supply of the aircraft uncertain, Wizz Air has leased flight-ready aircraft to satisfy its flight schedule, leading to lack of profits.
Ryanair can be affected by price wars. Ticket prices could fall even further, with debt also being a difficulty, says Gerald Khoo of Panmure Liberum, who also recommends selling the stock.
“One of the big differentiating factors between Wizz Air on the one hand and Ryanair and EasyJet on the other is leverage,” Khoo said in an emailed comment.
Wizz Air’s net debt is 4.6 times its annual profit, while Ryanair and EasyJet have net money and due to this fact have far more financial flexibility.
Investors’ preference for Wizz Air’s competitors is reflected of their valuation. They are willing to pay 10.7 times their earnings for Ryanair, 7.6 times for EasyJet, and 5.3 times for Wizz Air.
Analysts also prefer EasyJet and Ryanair over Wizz Air based on their consensus rating – a mean of buy, sell and hold recommendations.
Still, analysts are overall optimistic in regards to the stock, which has nine buy recommendations and ten hold recommendations, in addition to five sell recommendations. Their average price goal of 1,982 pence implies a 51% return over the following 12 months.
One optimist, Ruairi Cullinane of RBC Capital Markets, hopes Wizz Air can increase its margins back to pre-pandemic levels. That could occur in fiscal 2026 if the corporate can return to capability growth and has a more favorable fleet mix, Cullinane said.
Still, RBC’s earnings estimates are on the lower end of Wizz Air’s forecast range for the present fiscal 12 months ending in March, “which poses risks to the current year’s outlook,” said the analyst, who rates the stock “outperform” and expects it to double in value next 12 months.
Wizz Air has taken steps to extend profits again, including by Start Next 12 months there might be a no-frills long-haul flight to Saudi Arabia, CEO Jozsef Varadi said in an interview last week.
