Will the IAG share price recover in December?

The International Consolidated Airlines SA (LSE: IAG) share price was sucker-punched on Friday. Can it bounce back before the end of 2021?

| 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.

Stack of one pound coins falling over

Image source: Getty Images

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.

sdf

The International Consolidated Airlines (LSE: IAG) share price tumbled on Friday as investors recoiled from the news that a far-more-powerful variant of the coronavirus had been found in Southern Africa. 

As I type, the UK has suspended flights from six countries on the continent. By the time you read this, it could be more. If existing IAG holders are looking for crumbs of comfort, one might say that pretty much everything else — including other airline stocks, tour operators and hoteliers — fell in tandem.

So, where next for the British Airways owner? Well, no one can know exactly what will happen next. Even so, we can come up with a number of scenarios as to what could. For ease, I’ve gone to both extremes. 

The worst-case scenario

By far the worst possible turn of events for markets — and the IAG share price — is for evidence to emerge that the variant is running riot. As successful as the UK’s vaccination programme has been, the NHS was already trying to contain another outbreak of infections before Friday’s news hit. Any suggestion that the existing vaccines aren’t powerful enough will compound the issue. Perhaps worst of all, we won’t know for a few weeks. And the market isn’t partial to uncertainty.

Naturally, all this won’t do IAG any favours. As concerns mount, we can expect more travel restrictions to be imposed. That will put the already indebted FTSE 100 member under yet more financial pressure when it can least afford it. Add other concerns such as the prospect of interest rate rises and soaring prices to the mix and things could get very nasty.

On the other hand…

Now let’s ponder the best outcome.

News in December that the spread of this new variant has been contained would clearly be a good thing, as would indications that it’s not as strong as first thought (and/or existing vaccines can be quickly modified). I wouldn’t expect the new travel restrictions to be dropped. However, it may mean that recently reinstated (and lucrative) routes can stay open.  

Should all this come to pass, I’d speculate the IAG share price will bounce hard in December before levelling off as skilled (lucky?) traders take profits. What I believe is less likely to happen, however, is for any rise to be sustained. For me, there are simply too many unknowns ahead. Just knowing that another variant has been found highlights that IAG’s road to recovery will be long and hard. 

IAG share price: risk vs reward

Throughout the coronavirus crisis, I’ve steered clear of investing in airlines. Depending on the time period one selects, this has either been a huge mistake or a wise move. Between October 2020 and March 2021, for example, the IAG share price more than doubled. In the last six months, the same stock has lost a third of its value. Investing is hard.

As a committed Fool, I’m looking to make money from shares over the long term. From this perspective, there could be a place for IAG in my portfolio, especially if I were sufficiently diversified elsewhere. With a huge amount of quality stocks to choose from, however, I’m still hesitant, especially as others offer a solid dividend stream to boot. 

Will the IAG share price recover in December? I’m not counting on 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.

Paul Summers 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

Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
Investing Articles

3 techniques to turbocharge your SIPP for a richer retirement!

Christopher Ruane considers a trio of ways he thinks an investor could use to try and grow the long-term value…

Read more »

ISA coins
Investing Articles

With a £20,000 Stocks and Shares ISA, here’s how someone could make £762 each month in passive income

A well-invested Stocks and Shares ISA might rise in value due to share price growth -- but it can also…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

Just released: our 3 top small-cap stocks to consider buying in June [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

I asked ChatGPT which stocks will be promoted to the FTSE 100. Here’s what it said!

Each quarter, stocks are promoted to or relegated from the FTSE 100 index. ChatGPT reckons these UK shares are ones…

Read more »

Businessman hand flipping wooden block cube from 2024 to 2025 on coins
Investing Articles

How many Legal & General shares must an investor buy to earn £1k of monthly passive income?

Harvey Jones calculates how much passive income someone could earn by taking a big position in one of the FTSE…

Read more »

Road 2025 to 2032 new year direction concept
Investing Articles

If I couldn’t touch my ISA or SIPP for 10 years, I’d be happy owning these super stocks

Edward Sheldon has been analysing his ISA and pension stock holdings. And he believes these two companies will still be…

Read more »

Businessman with tablet, waiting at the train station platform
Investing Articles

7% yields and low P/E ratios? These 2 cheap shares look promising!

The FTSE All-share is a great place to hunt for cheap shares, in my opinion. I've uncovered two top dividend…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

This FTSE 100 dividend stock could pay me passive income for the next 20 years

This UK stock has rewarded its investors with passive income every year for over 30 years. And it gets better…

Read more »