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Investing.com -- Barclays (LON:BARC) has upgraded Wizz Air to “equal weight” from “underweight” and raised its price target from £9 to £11, citing the carrier’s exit from Abu Dhabi as a strategic correction, in a note dated Thursday.
The move comes after Wizz Air accumulated losses of around €40 million over the past two years in the region, hindered by limited traffic rights, geopolitical risks, and operational difficulties related to climate conditions.
The closure is expected to generate short-term costs, including compensation to partners, airports, and suppliers. Redundancy costs, however, may remain low due to the non-unionized labor framework in the UAE.
Wizz Air plans to redeploy aircraft to Central and Eastern Europe, though full utilization is not anticipated until after winter 2025/26 due to limitations in transferring crew between jurisdictions.
Barclays views the withdrawal as a recognition of Wizz Air’s regional strengths. The report calls for a cut in annual growth plans from around 20% to single-digit rates, citing past overexpansion driven by excess aircraft rather than market opportunity.
It also recommends cancelling the airline’s Airbus A321XLR orders, arguing the model is better suited to flag carriers with premium and cargo offerings.
Financial projections were revised following the exit. FY26 net income is expected to fall to €165 million due to reduced capacity, but improve to €231 million in FY27 and €396 million by FY28.
Adjusted EPS is forecast at €1.29 for FY26, rising to €3.10 by FY28. EBITDA is expected to grow from €1.63 billion in FY26 to €2.10 billion in FY28, while EBIT margin is set to rise from 6.4% to 8.2% over the same period.
Barclays has adjusted revenue forecasts downward, with FY26 total operating revenue now estimated at €6.02 billion, 3.7% below prior projections.
Cost estimates have also been lowered, particularly for fuel and wages, contributing to improved operating margins.
Passenger RASK is forecast at €2.34 in FY26, flat year-over-year, while ex-fuel CASK is projected to rise slightly to €2.93. Load factors are expected to remain above 92% through FY28.
Free cash flow is expected to grow from €504 million in FY26 to €692 million by FY28. Net debt is projected to decline gradually to €4.49 billion by FY28.
Return on equity, which stood at 92.4% in FY25, is expected to normalize to 43.4% by FY28.
Barclays’ DCF valuation assumes a brighter mid-term outlook, although the brokerage continues to express caution around Wizz Air’s aircraft financing and market competition in CEE.