Panmure Liberum keeps 'sell' rating on Wizz Air despite raised target price

Panmure Liberum has maintained its 'sell' rating on Wizz Air Holdings PLC (AIM:WIZZ) , the budget airline, while raising its target price to 700p from 600p. The broker said Wizz Air's capital markets day set relatively stretching financial targets, although they remained well below pre-pandemic levels, with a goal of a 10% operating margin for the financial year to March 2030. Panmure Liberum said the 10% operating margin target would be sufficient to cover the airline's cost of capital in terms of return on invested capital, but maintained its concerns over the quality and sustainability of earnings. The broker highlighted Wizz Air's growing reliance on aircraft disposal gains from sale and leaseback transactions, which accounted for less than 10% of operating profit in the 2019 and 2020 financial years but exceeded 180% in the 2026 financial year. Panmure Liberum said it was notable that Wizz Air gave no indication at its capital markets day that it planned to move away from sale and leaseback financing or that its margin and non-fuel unit cost targets excluded continued material contributions from disposal gains. The broker described these gains as a low-quality source of earnings because they pull forward profits from future years and leave the airline facing higher unit costs over the life of each lease. Panmure Liberum raised its earnings forecasts to reflect better unit revenue performance in the September quarter, although it continues to forecast substantial losses for the airline this year and next. The broker said capacity growth was set to moderate to between 10% and 12% a year, focused mainly on c...