We Increase Our FVE for Wizz Air to GBX 6,800 to Reflect Growth and Cost-Reduction Opportunities

No-moat Wizz Air is the Goldilocks of the airline industry--big enough to matter to suppliers, but small enough to enjoy a substantial runway of profit growth before reaching maturity. We upgrade our fair value estimate to GBX 6,800, from GBX 5,000, and believe the market does not fully appreciate the company's revenue growth and margin expansion opportunities. The coronavirus pandemic brought air travel to a near standstill, while the International Air Transport Association forecasts airline traffic to only recover to 2019 levels by 2024. The conventional thinking adopted by the market is that low-cost airlines, or LCCs, should recover faster than network peers due to lower and more flexible cost structures, and robust balance sheets, while benefiting from a relatively sharper recovery in short-haul leisure travel. While most airlines will use the downturn as an opportunity to restructure costs, we believe Wizz Air's growth and cost-reduction opportunities are more sustainable in nature.