Wizz Air Stock Plummets 27% After Disappointing Earnings

Wizz Air Holdings Plc's stock experienced a notable decline, dropping as much as 27% in London trading. This significant decrease came after the airline released its annual financial results, which did not meet analysts' expectations. The company reported a net income of €225.8 million for the year ending March, falling short of its target range of €250 million to €300 million.

The airline's operating profits saw a substantial decrease of 62%, totaling €167.5 million. This figure was significantly lower than the €246 million that analysts had forecasted. The decline in profits was primarily due to increased operating expenses and the grounding of several aircraft due to engine issues.

Despite these challenges, Wizz Air achieved record passenger numbers and increased its revenue by 3.8% to €5.27 billion. The airline's load factor improved to 91.2%, and its total cash balance rose by 9.3% to €1.74 billion. These positive metrics, however, were overshadowed by the significant declines in operating profit and net profit.

The airline's CEO highlighted the company's resilience and transformation, noting improvements in operational metrics and a strategic focus on growth and market leadership. The outlook for the next fiscal year includes capacity growth and improved cost management, although specific guidance was not provided.

The airline's financial results reflect a strong recovery in financial performance, particularly in income growth and margin improvement. However, high leverage and negative free cash flow present significant risks. The stock’s technical indicators show upward momentum, supporting a positive outlook. The attractive valuation, with a low P/E ratio, suggests an undervalued opportunity in the airline industry. Positive corporate events, like passenger growth and sustainability initiatives, further enhance the growth potential, offsetting some financial risks.