Although the aviation industry took one of the biggest hits during the pandemic, Wizz Air (LSE: WIZZ) has had a strong recovery. The last 12 months have seen a 35% rise in the share price. The stock is down from its all-time high in March, but is still up over 10% year-to-date. With a period of halted flights and major travel restrictions potentially behind us, could this spell a continuation in the rise of the price of this Hungarian-founded FTSE 250 stock?
Q1 take-off
Well, the latest trading update would certainly suggest so. For the three months to June 30, passengers carried rose to near 3m, a 317% increase from the same period last year. Revenues also rose by 120% to €199m. Considering the firm was only operating on a third of its usual capacity, these results are impressive. If the firm continues with a performance like this, I expect a continuation in the Wizz Air share price rise.
Within the statement, it was also mentioned how capacity in July and August was expected to be 90% and 100% of 2019 levels, respectively. These figures won’t be confirmed until the next update. But if it reached its goal, I’d expect a further rise in the stock price. This makes me wonder whether now is a good time for me is to buy ahead of any potential share price growth.
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Wizz Air problems
Yet, with all the positives above, why have we seen a stagnation in the Wizz Air share price since the release of the results?
Firstly, some issues remained in Q1. Although I was keen to mention a rise in revenues, I must also note that the three-month period saw losses of €114.4m – an increase from the €108m loss of the 2020 period. This is clearly not good news and only further highlights the unflattering effects of the pandemic.
Another reason why the stock has stalled may be due to future uncertainty surrounding capacity. Although the firm expected to match 2019 levels by August, making it the first European airline to recover to pre-pandemic levels, there is no guarantee this will last. The stock evidently expected a busy summer as eager travellers rushed to get away. But what will the next few months hold in store? We’re aware of the negative impact the winter period can have on coronavirus cases, and this is reflected through the firm’s caution on future predictions. This could present a major issue for the share price.
Will the price continue to fly?
The latest results clearly show that the business is on its way to recovery as seen by its year-to-date rise. What does worry me, however, is what the short term may hold for the firm. As much as the aviation industry has recovered, fundamentally it remains fragile. Should Wizz Air manage to weather the next few months, I think a clear runway will present itself for the price to take off. And while I think that long term, the stock will increase in price, the next few months have the potential to be volatile. With this said, I would still buy this FTSE 250 stock for my portfolio today.
