RBC Capital Markets has downgraded Wizz Air Holdings (LSE:WIZZ) to “Underperform” from “Sector Perform”, arguing that the low-cost airline’s latest earnings were boosted by non-recurring factors and that the market may be too optimistic about the speed of its earnings recovery.
The broker maintained its 900 pence price target, which implies roughly 20% downside from current trading levels. RBC added that its forecasts for fiscal 2027 and fiscal 2028 remain below consensus estimates, even after factoring in lower fuel costs.
Lower Fuel Costs Unlikely to Drive Earnings Upgrades
According to RBC, the recent decline in jet fuel prices is unlikely to trigger meaningful near-term earnings upgrades. The broker believes that weaker unit revenues, rising non-fuel operating costs and continued capacity expansion are likely to offset much of the benefit from cheaper fuel.
The analysts also cautioned that revenue per available seat kilometre (RASK) could remain under pressure beyond the first quarter as airlines continue adding capacity across Central and Eastern Europe.
One-Off Gains Boosted Fiscal 2026 Results
RBC argued that the quality of Wizz Air’s fiscal 2026 earnings was weaker than headline results indicated. The broker noted that earnings benefited from approximately €542 million of other income, primarily linked to compensation payments and gains from sale-and-leaseback transactions, as well as €102 million in foreign exchange gains.
The analysts expect these sources of income to diminish over the coming years, creating additional challenges for earnings growth, even as a reduction in grounded aircraft is expected to improve operational performance.
Valuation Reflects Optimistic Recovery Expectations
RBC also highlighted management’s increasing preference for aircraft ownership instead of sale-and-leaseback financing, citing the long-term cost advantages of owning aircraft outright.
Although the broker continues to forecast earnings growth through fiscal 2030, it expects EBIT margins to remain around 6% to 7%, below the double-digit margins Wizz Air achieved before the pandemic.
The analysts concluded that the current valuation implies investors are expecting a much sharper “hockey stick” recovery than RBC anticipates, leaving the shares exposed if future earnings fail to meet market expectations.
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