The IAG share price: can it soar in August and beyond?

The IAG share price has been sliding after a good start to 2021. Will it pick up in August as hopes for aviation get a boost?

| 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.

Things might finally be looking up for International Consolidated Airlines (LSE: IAG). As Covid-19 restrictions ease around the globe, the owner of British Airways has been getting bullish about its flight schedule. The IAG share price, however, has not looked so cheerful. It peaked early in 2021, but since March it’s been sliding back.

IAG reckons it should operate at around 45% capacity from July to September, compared to its pre-pandemic passenger numbers. And it hopes to get that figure up to 75% by the end of this year. Such predictions are, of course, highly uncertain. Rules on flying seem to be changing almost daily, and the direction of delta variant infections is still very much an unknown.

On the negative side, IAG reported a €2bn loss for the six months to 30 June. And at the time, borrowings had risen 26% over the same point in 2020, to nearly €19.8bn. The company assured us that it still had strong liquidity, amounting to €10.2bn at the halfway stage.

But what does all this say about valuation? My Motley Fool colleague G A Chester has worked out that IAG’s enterprise value today is actually €3.3bn higher than it was before the 2020 crash. I find that quite shocking.

Enthusiasm running out?

Since the IAG share price crash, we’ve seen a number of false starts to its anticipated recovery. Starting back in November, bullish investors have tended to pile in whenever there’s some good-looking news. But the optimism tends to wane as the market then awaits the next snippet of progress.

It looked like the recovery might actually be here in early 2021, after 2020 results spoke of refinancing in an upbeat manner. Successful bond launches shortly after helped push the stock to that March peak. Since then, though, it’s slid 23%. And two quarterly updates have failed to inspire further optimism.

The next update from IAG is not due until 5 November, when we should have Q3 figures. By then, we’ll know a lot more about how the coronavirus battle is going. And the aviation picture should be a lot clearer. I can’t help wondering if that Q3 update could prove to be the pivotal one that July’s Q2 update wasn’t.

Next IAG share price spike?

But what might it take for the IAG share price to start heading upwards before then? Well, August seems to be very much a ‘hold your breath’ month regarding Covid-19 progress. Initial rises immediately after so-called ‘freedom day’ when restrictions were lifted in England led to pessimism. And many were predicting cases to skyrocket. But so far, that’s not been happening.

If we get better figures before the end of the month, I think IAG shares could start on another of their upwards journeys. But to see real sustainable progress, I reckon we might have to wait at least until Q3 time in November. Me? I’m still not taking any chances, and I’m steering clear of such an uncertain business. And that enterprise value thing would keep me away anyway.

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.

Alan Oscroft has no position in any of the shares mentioned. 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

Up 75% in 5 years, I reckon this FTSE 250 still has lots to give!

Our writer explains why this FTSE 250 stock could still continue to provide growth and returns despite already being on…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 high-quality FTSE 250 stocks to consider buying

The FTSE 250 is home to some of the best investment opportunities out there. This Fool highlights two stocks for…

Read more »

Investing Articles

The Marks and Spencer share price dips! Is this my chance to buy?

Marks and Spencer was one of the hottest stocks on the market last year. With its share price falling in…

Read more »

Growth Shares

How low could the boohoo share price go?

Jon Smith explains why the enterprise value and the low risk of bankruptcy should help to prevent the boohoo share…

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Down 23% in a year! Can the Diageo share price regain £30 in 2024?

This Fool UK writer is checking the charts to see if the Diageo share price can recover from the recent…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

I wouldn’t touch this FTSE 100 stalwart with a bargepole

Despite looking like a bargain on paper, this Fool is avoiding FTSE 100 constituent Vodafone at all costs. Here he…

Read more »

Investing Articles

I’m waiting for the Rolls-Royce share price to pull back before I buy

The Rolls-Royce share price has been the Footsie's best performer in the last year. But this Fool has no intention…

Read more »

Front view photo of a woman using digital tablet in London
Dividend Shares

2 dividend stocks to take me from £0 to £9.5k in second income

Jon Smith talks through some ideas with second income potential, including one stock that has a dividend yield above 10%…

Read more »