Is Increased Competition Weighing On Wizz Air Holdings PLC, Vodafone Group plc And Talktalk Telecom Group PLC?

Are these 3 stocks set to soar in spite of a high degree of competition? Wizz Air Holdings PLC (LON: WIZZ), Vodafone Group plc (LON: VOD) and Talktalk Telecom Group PLC (LON: TALK).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Shares in airline company Wizz Air (LSE: WIZZ) have fallen by 2% despite the company releasing a positive trading update. In fact, following its third quarter it now expects underlying net profit for the full year to be higher than previous guidance, with a figure of between €200m and €210m being forecast versus previous guidance of €190m to €200m.

Encouragingly, Wizz Air reported a significant rise in passenger numbers, with the total increasing from 3.8m in the third quarter of the previous year to 4.7m this time. Part of the reason for this was an increasing load factor, with it standing at 85.7% versus 84.6% in the same quarter last year. And with fuel costs also tumbling, the long-term outlook for the business is relatively bright.

Of course, the airline industry remains hugely competitive and this level of competition could increase when oil eventually begins to rise in price. Companies such as Wizz Air may not be able to pass on all of the additional costs to consumers and with the outlook for the global economy being uncertain, price may become an increasingly important factor moving forward.

However, with Wizz Air trading on a price-to-earnings growth (PEG) ratio of just 0.8, its risk/reward ratio seems to be highly appealing at the present time.

Rising to the challenge

Also experiencing higher competition are Vodafone (LSE: VOD) and Talktalk (LSE: TALK). As more media/telecoms companies are moving into the quad play space (where one provider offers landline, pay TV, broadband and mobile services), their market share is likely to come under severe pressure.

In the case of Vodafone, it’s responding by investing billions in its infrastructure across Europe to ensure that its mobile offering remains highly competitive in terms of the availability and speed of its service. Furthermore, Vodafone is diversifying into pay TV having already launched a broadband service in the UK. And with the company also having bought up multiple assets in Europe, it appears to be in a stronger position now than in recent years. With Vodafone expected to increase its bottom line by 19% next year, its share price performance could be strong.

Meanwhile, Talktalk’s strategy has been hurt by the hacking incident last year, with its reputation among customers (and potential customers) likely to have been damaged. This is likely to hurt its sales strategy at a time when competition in the quad play space is increasing. Therefore, it would be of little surprise for the company’s share price to come under a degree of pressure in the short-to-medium term.

However, with Talktalk trading on a PEG ratio of only 0.3, this risk seems to have been priced-in by the market. As such, buying Talktalk for the long haul appears to be a sound move.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of TalkTalk Telecom Group plc and Vodafone. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing For Beginners

Up 10% in a day, this FTSE 250 stock still looks undervalued to me

Jon Smith explains why a FTSE 250 finance stock has soared higher and flags up reasons why this might not…

Read more »

Rolls-Royce's Pearl 10X engine series
Investing Articles

Rolls-Royce shares are close to reaching £10. Is it too late to buy?

Rolls-Royce shares have come a long way. With the price within spitting distance of £10, our writer considers whether he…

Read more »

Close up of manual worker's equipment at construction site without people.
Investing Articles

With H1 profits back on track, is this FTSE 250 housebuilder ready to bounce back?

Operating profits are down 22% at Vistry. But as cost issues give way to government support, could the FTSE 250…

Read more »

Investing Articles

2 fantastic UK growth stocks to consider for a Stocks and Shares ISA

Looking for opportunities for a Stocks and Shares ISA portfolio? Our writer shares two ideas from the London Stock Exchange.

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

Investors could target £8,840 of annual dividend income from 5,851 shares in this FTSE 250 high-yield star!

Shares in this FTSE 250 stock generate a much higher dividend yield than the index average and can produce potentially…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

HSBC’s share price has dipped 5% to just over £9, so should I buy more right now?

HSBC’s share price has dipped in recently, but this could signal a bargain to be had. I ran the key…

Read more »

many happy international football fans watching tv
Investing Articles

Is this FTSE 250 stock gearing up to more than double its market cap by October?

Our writer considers the implications of a recent stock market announcement for the share price of this FTSE 250 retailer.…

Read more »

Inflation in newspapers
Investing Articles

3 overlooked UK shares growing dividends faster than inflation

Mark Hartley highlights three lesser-known UK shares offering inflation-beating dividends, while noting key risks investors should watch.

Read more »