What’s going on with the IAG share price?

The IAG share price has seen some wild swings in the past year. Is it ready for a consistent upturn now?

| 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.

The International Consolidated Airlines Group (LSE: IAG) share has seen some serious swings since the pandemic started. Despite the massive blow to travel stocks from the pandemic, the FTSE 100 aviation giant did not hit rock bottom till October 2020. After a brief time as a penny stock, it was rescued by vaccine developments in November, and there was no looking back for it. 

By April this year, it had reached a one-year peak of 217p. But has been sliding downwards since. It is now down by 22% from its highs. I think this is a good time to buy the IAG stock. In fact, I already did. 

To understand why it can fly, I think it is essential to first look at why it fell in the first place. Four reasons come to mind. 

4 reasons why the IAG share price fell

One, the fall in the IAG share price has a bigger context. Many other cyclical stocks whose prices rose sharply after the stock market rally of November, have slipped too. I reckon as they became pricey, investors sold them off, leading to a share price fall.

Two, fresh fears of the pandemic’s spread have rocked the stock markets recently. Coronavirus cases have been rising, especially those associated with the Delta variant. The FTSE 100 index even had a mini-meltdown las week, impacting all stocks. 

Three, freedom day has finally happened in the UK, but it was delayed by a month. As a result, I reckon a potential stock market pickup has been delayed. And even now, we have been asked to exercise caution when outdoors, which could impact investor sentiment.

Finally, rising inflation is bad news for travel stocks. Travel by individuals and households is a discretionary spending, which consumers reduce when there are other demands on their income. Inflation has rising in the past few months. If it continues to remain so, the travel demand may not pick up sustainably. 

Also, fuel costs are a concern for IAG. Crude oil prices have run up, which will either be passed on to customers or absorbed by airlines at an already financially difficult time for them. Neither is a good solution for these stocks. 

Why it can rise now

But there is another side to these challenges as well. If investors are rotating their investment across stocks, it also means that eventually, their interest will return to the likes of IAG. 

Also, there is evidence that even while coronavirus cases are rising, they are less severe now. In other words, vaccines are doing their work and travel can be safer. Further, many experts believe that high inflation will not stick around for much longer, so it need not impact travel companies significantly overtime. 

My assessment

Despite all this, the IAG share price is at less than half its pre-pandemic levels. Even accounting for the drag of the pandemic on its finance, I think the stock can start rising as travel becomes more routine again and improvements start showing in its financials. That is why I bought it.

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.

Manika Premsingh owns shares of International Consolidated Airlines Group. The Motley Fool UK has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

This 9.75% yielding FTSE 100 share is a total no-brainer for second income

This FTSE 100 insurance company is an absolutely brilliant source of second income and Harvey Jones reckons it will be…

Read more »

Dividend Shares

I could make £14.2k of passive income from £99 a week with this secret sauce

Jon Smith explains why sacrificing the immediate reward of dividends today can boost his long-term passive income prospects.

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Which looks the better bank buy right now: Lloyds or NatWest shares?

Lloyds shares are a very popular pick among FTSE 100 investors, but I think there are several better choices overall,…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,000 in savings? Here’s how I’d target a £14,616 annual passive income with M&G shares!

Big passive income can be generated over time with 9.5%-yielding M&G shares, especially if the dividends paid are used to…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

If I’d put £1k in this FTSE 100 stock five years ago, here’s how much I’d have now!

Mark David Hartley works out what sort of profit he’d have made by investing in this FTSE 100 pick pre-pandemic.…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »