I’d snap up this fallen FTSE 250 stock before it’s too late

Among the companies FTSE 250 – the second largest index in the UK – Wizz Air (LSE: WIZZ) stock looks curious to me at the moment.

The airline’s passenger numbers in 2023 so far have increased by 59% from the same period in pre-pandemic 2019. Competitors – like easyJet or IAG – has not recovered to baseline since Covid.

And this growth led to revenue in the last quarter of £911m. That seems pretty high to me compared to Wizz Air’s £2.8bn market cap.

The crazy part is that despite this good news, the stock price of the Hungary-based airline dropped by more than 50%. I can get two shares now for the price of one in March 2021.

If the current share price of 2716p is as undervalued as it seems, Wizz Air shares could be a good investment. I was tempted to take some before it was too late, but there were a few things that put me off.

Turbulent times

The reason, I believe, that explains Wizz Air’s share price is that the company is not profitable. Losses are expected to reach £528m in 2021 and £465m in 2022.

And for 2023? CEO József Váradi said, “We continue to expect an overall net loss”.

This airline is in the ‘ultra low budget’ class, which means the margins are very thin. So the revenue numbers are getting harder and harder to turn into net profit.

Váradi expects profits in 2024. And if the budget flyer can turn, then the share price of this growth stock as low as in 2017 is definitely undervalued.

The UK’s worst airline?

The first sign that Wizz Air seems undervalued to me is that the problem is mostly external. The war in Ukraine, high fuel costs, and the cost of living crisis should all, hopefully, not cause profit problems for much longer.

A bigger problem is the negative press that the airline’s service is getting. Just recently, I came across a negative review of the airline on Sky News, The Guardianand even a Daily Mail piece called Wizz Air, “Britain’s worst airline.”

I guess the question is this: do I want to buy to a company I can call ‘Ryanair on steroids’?

Well, speaking of Ryanair, I would not mind asking for the same return as the shareholders of the Irish company that raised 10 times the return in the new year.

If I had £1,000

My thoughts on whether I want to buy shares here boil down to one question. Will travelers ignore the harsh experience of flying as long as it’s cheap?

I would say they probably will. I flew Wizz Air myself last summer, and while I did not love the flight from London Luton Airport, I reached the destination in one piece.

And looking more and more, I can’t ignore that budget companies like Ryanair, Aldi, Lidl, or Premier Inn have been very successful in recent years.

Therefore, I think there is potential here for very good growth. If I had a spare £1,000 to invest, I would open a position.