This FTSE 250 stock is up 35% in the past year. Can it continue?

After taking a hit during the pandemic, this FTSE 250 stock is on the road to recovery. Here, Charlie Keough looks at whether Wizz Air can keep rising.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Although the aviation industry took one of the biggest hits during the pandemic, Wizz Air (LSE: WIZZ) has had a strong recovery. The last 12 months have seen a 35% rise in the share price. The stock is down from its all-time high in March, but is still up over 10% year-to-date. With a period of halted flights and major travel restrictions potentially behind us, could this spell a continuation in the rise of the price of this Hungarian-founded FTSE 250 stock?

Q1 take-off

Well, the latest trading update would certainly suggest so. For the three months to June 30, passengers carried rose to near 3m, a 317% increase from the same period last year. Revenues also rose by 120% to €199m. Considering the firm was only operating on a third of its usual capacity, these results are impressive. If the firm continues with a performance like this, I expect a continuation in the Wizz Air share price rise.

Within the statement, it was also mentioned how capacity in July and August was expected to be 90% and 100% of 2019 levels, respectively. These figures won’t be confirmed until the next update. But if it reached its goal, I’d expect a further rise in the stock price. This makes me wonder whether now is a good time for me is to buy ahead of any potential share price growth.

Wizz Air problems

Yet, with all the positives above, why have we seen a stagnation in the Wizz Air share price since the release of the results?

Firstly, some issues remained in Q1. Although I was keen to mention a rise in revenues, I must also note that the three-month period saw losses of €114.4m – an increase from the €108m loss of the 2020 period. This is clearly not good news and only further highlights the unflattering effects of the pandemic.

Another reason why the stock has stalled may be due to future uncertainty surrounding capacity. Although the firm expected to match 2019 levels by August, making it the first European airline to recover to pre-pandemic levels, there is no guarantee this will last. The stock evidently expected a busy summer as eager travellers rushed to get away. But what will the next few months hold in store? We’re aware of the negative impact the winter period can have on coronavirus cases, and this is reflected through the firm’s caution on future predictions. This could present a major issue for the share price.

Will the price continue to fly?

The latest results clearly show that the business is on its way to recovery as seen by its year-to-date rise. What does worry me, however, is what the short term may hold for the firm. As much as the aviation industry has recovered, fundamentally it remains fragile. Should Wizz Air manage to weather the next few months, I think a clear runway will present itself for the price to take off. And while I think that long term, the stock will increase in price, the next few months have the potential to be volatile. With this said, I would still buy this FTSE 250 stock for my portfolio today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Hand of a mature man opening a safety deposit box.
Investing Articles

If I’d invested £5k in red hot BAE Systems shares 5 years ago here’s what I’d have today

BAE Systems shares have smashed the FTSE 100 for years and Harvey Jones is keen to buy more as they…

Read more »

Investing Articles

How I’d aim to earn £16,100 in passive income a year by investing £20k in a Stocks and Shares ISA

Harvey Jones is building a portfolio of high-yielding FTSE 100 dividend stocks that should give him a high and rising…

Read more »

Investing Articles

Down 8% in a month! The BP share price is screaming ‘buy, buy, buy’ at me right now 

When crude oil falls, the BP share price invariably follows. Harvey Jones is wondering whether this is the right point…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

Could the 9.8% M&G dividend yield get even bigger?

Christopher Ruane reckons that, although the M&G dividend yield is already close to a double-digit percentage, it could get better…

Read more »

Investing Articles

How much passive income could I earn by putting £380 a month into a Stocks and Shares ISA?

Christopher Ruane explains how he'd aim to turn a Stocks and Shares ISA into four-figure passive income streams each year.

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 passive income stocks I’m buying before an interest rate cut

With the market expecting interest rates to fall in August, time might be running out for investors looking to buy…

Read more »

Investing Articles

If I’d bought Rolls-Royce shares a year ago, here’s what I’d have now

Rolls-Royce shares have been the big FTSE 100 success story of the past 12 months and more. And there's still…

Read more »

Young female analyst working at her desk in the office
Investing Articles

If the Dow’s heading for 60,000 by 2030, can the FTSE 100 index hit 12,000?

Strategist Ed Yardeni predicts a 50% rise for America’s Dow Jones Industrial Average over six years. Can the FTSE 100…

Read more »