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Where might the IAG share price go in November?

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The IAG (LSE: IAG) share price has lost momentum recently. In fact, the stock has dipped almost 15% in the last five trading days alone. Will next month’s update on trading (5 November) help arrest this downward pressure? I’m torn. 

IAG share price: reasons to be bullish

One reason for thinking the recent turbulence may prove temporary is the ongoing lifting of travel restrictions. The forthcoming reopening of US borders to European travellers, for example, is clearly a good thing for the British Airways owner. This could/should inspire more previously-reluctant travellers to return to the skies. And evidence of this, in the form of increased bookings, not to mention talk of the company returning to profitability sooner than thought, could see IAG fly next month. 

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As a sign that confidence is returning to the industry, BA recently announced that it was now looking to recruit new cabin crew in advance of huge expected demand next summer. Although the actual number of vacancies wasn’t made public, union Unite has recently told the Financial Times that it expected up to 3,000 people to be rehired by the business.

Other things that may boost the IAG share price include more details on plans for British Airways to provide a short-haul service from Gatwick. Once shelved but now seemingly back on track, this strategy has the potential to allow the company to snag a piece of the low-cost pie from peers like easyJet and boost its industry clout.

On the other hand…

The above all sounds promising. However, I don’t think there’s a shortage of reasons to think the IAG share price could remain volatile in November.

I wonder, for instance, whether the aforementioned removal of restrictions may already be priced in. Indeed, this is the reason given by broker Berenberg for recently reducing its target for the IAG share price to 200p from 230p. Yes, this would still imply a near-30% upside based on where the stock is now. Nonetheless, it doesn’t exactly scream confidence.

In addition, there’s also chatter that heavily indebted IAG will soon need to tap the market for more cash. Such a move would dilute existing holders. That’s not something any prospective investor hovering over the ‘buy’ button wants to see on the runway.

Perhaps in expectation of this, IAG was the third most popular sell on share-dealing platform Hargreaves Lansdown last week. Interestingly, it didn’t appear on the list of 20 most popular buys.

A simple bout of profit-taking? Perhaps. After all, the IAG is still up almost 50% in 12 months. Then again, the recent rise in Covid-19 infection levels could be prompting some holders to re-evaluate the airline’s outlook. Any suggestion that the UK government may be about to reintroduce measures designed to restrict the spread could be taken very badly by the market. 

Better buy

Of course, knowing exactly where stocks will go next is near impossible. Moreover, it’s simply not Foolish to buy anything based solely on a few months of trading and news flow. As a long-term investor with finite funds, I need to be confident that the IAG share price is capable of delivering better returns than I’d get elsewhere for years.

As things stand, I’m still not convinced. With arguably better prospects (and a cracking dividend), I’d feel more comfortable parking cash in this FTSE 100 stock instead.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

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