The Motley Fool

Is the IAG share price a bargain not to be missed?

An airplane on a runway
Image source: Getty Images.

The International Consolidated Airlines (LSE: IAG) share price has suffered extreme volatility since the stock market crash last year. In fact, compared to its pre-pandemic price, it’s fallen 64% to around 150p. This makes IAG one of the worst performing UK shares since the pandemic began. But due to this massive discount, are IAG shares undervalued and should I buy?  

Trading update

Its trading updates have not been comfortable to read recently, and the most recent half-year trading update was no different. Indeed, the airline reported a large operating loss of over €2bn. Although this was lower than last year’s figure of €4bn, it’s still far too high and a serious worry for customers.

One Killer Stock For The Cybersecurity Surge

Cybersecurity is surging, with experts predicting that the cybersecurity market will reach US$366 billion by 2028more than double what it is today!

And with that kind of growth, this North American company stands to be the biggest winner.

Because their patented “self-repairing” technology is changing the cybersecurity landscape as we know it…

We think it has the potential to become the next famous tech success story. In fact, we think it could become as big… or even BIGGER than Shopify.

Click here to see how you can uncover the name of this North American stock that’s taking over Silicon Valley, one device at a time…

The recovery is also looking fairly slow, with passenger capacity in the second quarter just 21.9% of 2019. It is hoped that this will improve to around 45% for the third quarter, yet significant uncertainty remains. Accordingly, it remains unclear when the company will be able to make a profit again. This is likely to continue to have a negative effect on the IAG share price.

Nonetheless, while the headline figures look grim, there are positives to take away as well. For example, as of June 30, it had liquidity of €10.2bn. This was primarily due to bonds issued by the group, alongside a $1.755bn revolving credit facility and the money raised from the rights issue last year. Although this means that net debt has now reached over €12bn, compared to under €10bn last year, it’s promising to see that IAG is not facing a liquidity crisis any time soon.

Other factors

Although liquidity is strong, I do have worries that costs are going to keep rising. Indeed, IAG has a pension deficit of €30bn, and this needs to be paid up. While it deferred these contributions due to Covid, it’s set to resume payments of €41m each month from October. This will increase the costs for the company, at a time when it’s struggling to generate any significant revenues. Accordingly, despite statements to the contrary by CEO Luis Gallego, there are fears that, like easyJet, it will have to issue more shares. This would dilute the IAG share price, having a negative effect.

On the other hand, there are some signs that international travel is starting to return towards 2019 levels. This is because the UK government is in the process of abandoning PCR tests for cheaper lateral flow tests for fully vaccinated passengers. Several countries, like Turkey and Pakistan, have also been removed from the red list. And good news came on travel to the US this week. This may help boost the IAG share price.

Is the IAG share price undervalued?

Although a stock may be cheaper than it was before, this does not necessarily equate to better value. I believe that this is the case with IAG. The airline has accumulated huge losses over the pandemic and its future looks uncertain. With a price-to-book ratio of around 10, far higher than it has been in the past, I also don’t think that the IAG share price is as cheap as many people may think. Although there is always the chance that the share price will soar, I’m staying away.

Our #1 North American Stock For The ‘New-Age Space Race’

Billionaires like Jeff Bezos, Bill Gates, Elon Musk, and Mark Zuckerberg are already betting big money on the ‘new-age space race’, and for one very good reason…

…because this is an industry that according to Morgan Stanley could be worth $1 TRILLION by 2040.

But the problem is most of their investments are in private companies — meaning they’re largely off-limits for everyday investors.

Fortunately, our team of analysts have identified one little-known company that’s at the cutting-edge of the space industry, and is currently trading at what looks like a VERY reasonable valuation

for now.

That’s why I want to urge you to check out our premium research on this top North American space stock ASAP.

Simply click here to see find out how you can grab your copy today

Stuart Blair 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.