Investing.com -- HSBC Global Research in a note dated Friday has upgraded its rating on Wizz Air Holdings Plc (LON:WIZZ) to "buy" from "hold," citing a combination of robust demand growth in Eastern Europe, network densification, and an attractive valuation.
Alongside the upgrade, HSBC raised its price target for Wizz Air to 1,900p, up from 1,150p, reflecting an estimated 50% upside from the current market price.
Wizz Air, a key player in the low-cost airline segment, has a strong presence in Eastern Europe, where GDP growth is projected to outpace Western European economies.
According to HSBC’s analysis, the number of flights per capita in Wizz’s core markets remains much below that of more developed markets, indicating room for growth.
The airline is expected to benefit from a demand-supply dynamic where passenger growth is set to outpace capacity expansion, supporting unit revenues over the coming years.
Additionally, Wizz Air’s aggressive market positioning, particularly in Romania, Poland, and Hungary, has allowed it to strengthen its foothold as the dominant carrier in several key airports.
HSBC analysts believe Wizz Air’s strategy of network densification will drive operational efficiencies.
The airline is expected to increase flight frequencies on existing routes, which could enhance brand awareness and attract higher-yielding corporate traffic.
Expanding route frequency also provides Wizz Air with a competitive edge in securing airport slots, particularly at high-traffic Eastern European airports that are approaching capacity constraints.
This strategic positioning could help the airline reduce airport fees, improve aircraft utilization rates, and increase crew productivity.
Despite recent market turbulence, HSBC sees Wizz Air as trading at an attractive valuation compared to its historical levels.
The stock is currently valued at a FY26 estimated price-to-earnings (P/E) ratio of 5.7x, representing a discount of more than 20% compared to pre-pandemic lows.
While Wizz Air has faced near-term profitability challenges, HSBC’s valuation model incorporates a shift in investor focus to FY26 earnings, when the airline is projected to return to strong growth. HSBC analysts forecast a net income of €340 million for FY26, 5% above consensus estimates.
Wizz Air’s path to recovery is not without obstacles. The company has been affected by aircraft groundings due to Pratt & Whitney engine inspections, leading to compensation claims that have helped mitigate financial pressures but have not fully offset operational disruptions. Rising leasing and airport costs also pose potential risks.
However, HSBC believes that these challenges are temporary and that Wizz Air’s structural advantages—its strong market position in Eastern Europe, expanding network, and cost efficiencies—will allow it to emerge stronger over the medium term.