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This airline’s directors have sold millions of pounds of shares. Here’s my plan.

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Christopher Ruane
·3-min read
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Aircraft wind on the sunrise sky background.
Aircraft wind on the sunrise sky background.

After a tumultuous year in aviation, vaccination rollouts have boosted confidence that passengers will take to the skies in increasing numbers. Like Ryanair and Easyjet, Wizz Air (LSE: WIZZ) has seen some benefit in the stock market. The Wizz Air share price has increased markedly from its lows last year.

Currently, the Wizz Air share price is up 125% from where it stood a year ago. However, it is down 13% from its highs earlier this month. That might be in part due to several directors selling.

Director sales

The recent bout of director selling started in February. The chief executive officer offloaded £6.3m worth of shares. That was when the Wizz Air share price stood at £53.17.

Several director level executives have sold shares on the open market in March. For example, one sold over a million pounds’ worth of shares on 1 March at £54.70. Another sold over half a million pounds’ worth of shares the following week.

But the biggest sale by far was in the middle of the month. The airline’s biggest investor unloaded £400m of shares at a price of £52. Its boss is the Wizz Air chairman. That sounds like a large amount of shares. But it’s important to note that it’s the company selling rather than the chairman selling his own holding. The firm still holds 7.3m shares. So while it reduced its stake by over half, it retains a significant position in Wizz Air.

Wizz Air share price performance

Like other investors, directors sell for all sorts of reasons, from portfolio realignment to personal financial requirements.

Nonetheless, when I see so many director level executives sell at once, it makes me think that the shares may have limited upside. Directors pay attention to the business. They have more interest in it than most investors. So their assessment of its valuation and prospects carries some weight with me.

They can still be wrong like everyone else. However, I do think the rally in airline shares in recent months may be running out of steam. That could affect the Wizz Air share price.

Wizz has more than doubled an investment made a year ago. Yet are its prospects twice as good now as they were then?

Where next for Wizz

I like Wizz’s business model and its focus on growth markets in eastern Europe. Its well-known brand and extensive network help to give it an advantage in some markets. It has some attributes that could make it an attractive re-opening stock.

However, I am not sure that airline demand is set to recovery fully any time soon. Last month, passenger numbers fell from January. At around 383,000 they were 87% down from the prior year. I expect March to be another very tough month with low demand.

Understandably, the airline has focussed on optimizing its cost structure and minimizing cash burn. Nonetheless, lockdowns continue in various forms across Europe. So the outlook for demand remains uncertain.

The historic price-to-earnings ratio of 15 times doesn’t look cheap to me. I expect reduced earnings not only this year but likely also next year. I think the long tail impact of the pandemic will continue to dampen demand for travel.

At the current Wizz Air share price, I am not a buyer.

The post This airline’s directors have sold millions of pounds of shares. Here’s my plan. appeared first on The Motley Fool UK.

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christopherruane 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.

Motley Fool UK 2021