Wizz Air Holdings PLC (LON:WIZZ) has been downgraded to ‘sell’ from ‘neutral’ by analysts at UBS as the Swiss bank reassessed its view of Europe’s airlines, saying that while the budget airline was likely to be a “structural winner” for the central and eastern Europe market there was “downside share price risk” after the stock reached an all-time high.
In a note on Tuesday, UBS said despite the announcement of coronavirus (COVID-19) vaccines, they expected a “slower recovery” in the fourth quarter of 2021 than previously anticipated given travel and mobility restrictions and a “more cautious approach on the traffic ramp up during 2022” due to the potential for more travel limitations.
Despite the downgrade, UBS also raised its target price for Wizz to 3,500p from 3,220p, saying they expected that company to “continue to be ultra-low cost” and that the purchase of new gave the firm “the ability to grow and take market share for several years”.
IAG target hiked
In a separate note, UBS increased their target price for British Airways owner International Consolidated Airlines Group SA (LON:IAG) to 225p from 190p and for easyJet PLC (LON:EZJ) to 1,125p from 1,025p and reiterated their ‘buy’ rating on both stocks.
The bank said the key assumption for 2021 is that a coronavirus testing regime for aviation, aided by vaccination, will remobilise the industry, with “international network carriers” such as IAG expected to be the “greatest beneficiaries” of this.
UBS also said despite a cautious approach this year they expected for investor attention on the sector in 2021 with greater certainty on “where net debt and cash burn goes to” as well as “material [coronavirus] testing, a vaccine roll-out and the establishment of travel corridors, enabling the remobilisation of aviation”.
However, UBS also said they were taking a “conservative view” on the recovery of airline traffic, predicting that 2021 traffic will be at 58% of 2019 levels as opposed to previous estimates of nearer 70%.
Shares in Wizz Air were down 0.9% at 4,462p in late-morning trading, while IAG was 5.8% higher at 163.2p.