"Our signals are crafted through macro-valuation, trend analysis, and meticulous back-testing. This combination ensures a comprehensive evaluation of an asset's value, market conditions, and historical performance." eyeQ
Trading signal: long-term strategic model
Model value: 1,847.88p
Fair Value Gap: -47.01% discount to model value
Model relevance: 58%
Budget airline Wizz Air Holdings (LSE:WIZZ) is back in the news – its unlimited annual flight pass sold out in 48 hours and it is considering releasing more.
The plan is not without its controversies. Rival budget carrier Ryanair have described it as a “marketing scam” given that you can only book flights three days before departure.
But the airline needs to do something. The recent earnings report was the catalyst for a 35% sell-off in August alone! They issued a profit warning and sell-side analysts responded with a raft of downgrades. BarCap lowered their target price a huge amount, down to 1,000p.
eyeQ’s macro relevance score is 58%, meaning big-picture stuff such as growth and inflation explains just over half of price action; but we’re not above our 65% threshold for a macro regime, i.e. where macro is the dominant driver of the share price. Our valuation signal therefore comes with a health warning.
What’s interesting in the chart below is eyeQ model value. Yes, the eye is drawn to the spectacular crash in the share price. Yes, macro conditions have deteriorated. But not to anything like the same degree.
The difference is explained by the poor earnings and bottom-up company news. But that’s taken the stock significantly below macro-warranted model value. And model value is potentially trying to bottom out. Can macro cut Wizz Air a break?
The budget airline is a high-risk play and we’d want to see a definitive turn up in model value, but it is one to watch given how far the stock has fallen.
Source: eyeQ. Past performance is not a guide to future performance.
Where our smart machine calculates that any stock market index, single stock or exchange-traded fund (ETF) should be priced (the fair value) given the overall macroeconomic environment.
Model (macro) relevance
How confident we are in the model value. The higher the number the better! Above 65% means the macro environment is critical, so any valuation signals carry strong weight. Below 65%, we deem that something other than macro is driving the price.
Fair Value Gap (FVG)
The difference between our model value (fair value) and where the price currently is. A positive Fair Value Gap means the security is above the model value, which we refer to as “rich”. A negative FVG means that it's cheap. The bigger the FVG, the bigger the dislocation and therefore a better entry level for trades.
Long Term model
This model looks at share prices over the last 12 months, captures the company’s relationship with growth, inflation, currency shifts, central bank policy etc and calculates our key results - model value, model relevance, Fair Value Gap.
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