Broker tips: Wizz Air, Prudential

(Sharecast News) - Analysts at Berenberg slashed their target price on low-cost carrier Wizz Air from 4,400.0p to 3,500.0p on Wednesday, stating it was sitting on its hands despite a recent pullback in share price. Berenberg said a significant pullback in shares may have tempted some, with shares down roughly 35% since mid-February and underperforming peers by about 15 percentage points.

However, while Berenberg agrees that at these levels the shares are beginning to look "more enticing" on a medium-term view, it also urged investors to exercise patience.

The German bank pointed to elevated near-term risks that have yet to fully feed through, like high fuel price exposure, falling network isolation, staff-cost inflationary pressures, and suboptimal asset utilisation, exacerbated by weak demand in eastern Europe.

"We have sympathy with those more constructive on a three- to five-year view, but for now see a more attractive risk/reward balance offered by the likes of Ryanair. We cut our FY23E net profit materially and our price target to 3,500p, maintaining our 'hold' rating," said Wizz Air.

"The carrier is trading on 14.4x our FY24E versus a historical average of c13.4x, while we would also argue that visibility on this is extremely limited. In our view, the narrative will remain dominated by near-term headwinds in FY23E."

Analysts at Deutsche Bank lowered their target price on insurance company Prudential from 1,550.0p to 1,475.0p on Wednesday but said "brighter skies" were ahead.

Deutsche Bank stated lower estimates for Prudential were more than reflected in the stock's current price after falling almost 30% over the last six months, underperforming even the Hang Seng.

The German bank stated the reasons for this were "not hard to find" as, amongst other factors, it highlighted elevated political risk, further waves of new Covid cases across Asia, the impact of particularly severe lockdowns in Hong Kong and China and the failure to find a new chief executive.

"On the back of these factors, we lower our near-term sales estimates and also cut our target price; however, with almost 40% upside, trading at 0.77x EV and now on a prospective PE discount to European peers, this still leaves the shares deeply oversold," said DB.

However, the analysts did highlight that "rapidly improving" new Covid case numbers in most of its markets pointed to "brighter news flow ahead" for Prudential.