Earlier this month, I was trawling through the FTSE 100 index, looking for hidden value. I was searching for good businesses whose current share prices didn’t reflect their future earnings potential. However, when I saw the Footsie’s biggest fallers over the past six months, I spotted something that surprised me. Right at the bottom — #101/101 (one FTSE 100 share is dual-listed) — was International Consolidated Airlines Group. The IAG share price had collapsed since peaking in mid-March, but has rebounded strongly over the past 10 days. So what’s been going on?
The IAG share price crashes by nearly 90%
Long before Covid-19 wreaked havoc globally, the IAG share price was riding high. At the end of 2019, when coronavirus started spreading, the stock closed at a healthy 625p. It continued to rise over the next three weeks, hitting its 2020/21 peak of 684p on 17 January 2020. But then it became clear that Covid-19 was spreading globally and could prove fatal. Within weeks, governments closed their borders and locked down their populations. At this point, air passenger miles fell off a cliff as airline ticket sales plunged by 80%.
As a result, IAG stock nose-dived like a fast jet at an aerobatics display. In the steepest collapse seen since September 2001, the airline operator‘s shares crashed, closing at 159.25p on 14 May 2020. Thus, the shares had lost more than three-quarters (-76.7%) of their value in under four months. But the worst was yet to come for the owner of airlines British Airways, Spain’s Iberia, and Ireland’s Aer Lingus. As winter lockdowns were being mooted, the shares took another lurch southwards. On 25 September 2020, the IAG share price slumped to a lifetime low of 86.54p. That left the stock worth 12.7% of its 2020 peak value. Almost unbelievable, agreed?
Vaccines boost stocks
On ‘Vaccine Monday’ (9 November 2020), scientists revealed the existence of highly effective Covid-19 vaccines. As a result, stock prices soared, with the IAG share price being no exception. Over the next four months, the stock went on an absolute tear, peaking at 222.1p on 16 March 2021. However, over the past six months, the shares have swooned again. On Wednesday, 15 September, they closed at 137.12p. That’s a loss of almost 85p a share in six months — a crash of 38.3%.
The following day, I explained that I had changed my mind about the IAG share price. I said, “this FTSE 100 stock might just be a steal today” and “this stock might soar from current levels.” I finished by adding, “if I could buy all of IAG at its current market value of £6.8bn, I probably would!” On Friday, the IAG share price closed at 175.6p, up 1.9% on the day and 16.9% higher over five days. What’s more, it has leapt by more than a quarter (+28%) in 10 days. Today, the airline operator is valued at £8.7bn, gaining £1.9bn of market value in 10 days. Hence, I’m quite pleased with my recent comments!
