RBC Capital Markets has downgraded Wizz Air Holdings (LON:WIZZ) to Underperform from Sector Perform, saying the budget carrier's most recent reported results were bolstered by one-off items and that investors may be expecting a faster profit recovery than is realistic.
The brokerage retained its 900 pence price target for the airline - a level that it calculates implies about 20% downside from current market prices. RBC added that its own forecasts for fiscal 2027 and 2028 are below consensus estimates even after modelling lower jet fuel costs into its numbers.
Analysts at RBC do not believe the recent reduction in jet fuel prices will trigger immediate upgrades to earnings forecasts. They point to several offsetting pressures: weaker unit revenue, rising ex-fuel costs and continued elevated capacity growth. Taken together, these factors may blunt the near-term benefit of cheaper fuel on the carrier's profitability.
RBC also warned that revenue per available seat kilometre - RASK - could remain under strain beyond the first quarter as capacity continues to expand across Central and Eastern Europe. The firm highlighted that prolonged capacity growth in the region is a key variable that could suppress revenue trends relative to expectations.
On the composition of recent profits, RBC said Wizz Air's fiscal 2026 earnings quality appeared weaker than headline numbers suggested. The brokerage noted that results were supported by approximately 542 million euros in other income - largely stemming from compensation payments and gains on sale-and-leaseback transactions - as well as 102 million euros in foreign exchange gains. RBC expects these income streams to diminish in coming years, creating a headwind for any sustained earnings recovery even as the operational picture improves with fewer grounded aircraft.
The analysts also pointed to a shift in management preference toward owning aircraft rather than relying on sale-and-leaseback transactions. RBC said this move reflects longer-term cost implications that could affect the company's financial profile.
While RBC still projects that earnings will improve through fiscal 2030, it expects Wizz Air's EBIT margins to settle around 6% to 7% - materially below the double-digit margins the airline achieved before the pandemic. The brokerage warned that the current market valuation appears to price in a much sharper, hockey-stick style recovery than RBC's forecasts support, which could leave the shares vulnerable if earnings fall short of market hopes.
Contextual note - The commentary above reflects RBC Capital Markets' published views on Wizz Air's near- and medium-term earnings outlook, valuation and the drivers the analysts believe will shape recovery. It focuses on the interplay between temporary income items, capacity trends and structural cost choices that influence profitability.