IAG stock: a nightmare of uncertainty or a ripe opportunity?

With the world opening back up for travel and airline shares trading cheap, I investigate whether IAG stock could be a standout opportunity for me in 2022.

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Investing now in International Consolidated Airlines Group (LSE: IAG) stock may sound like a poor idea. Having been hit hard by the pandemic in every sense, one may feel wise to steer clear. From January to October 2020, shares of International Consolidated Airlines Group had plummeted around 78% from 420p to 91p. Currently trading between 160-165p per share, it is safe to say IAG stock has a long way to go in order to complete a pandemic recovery.

The question is therefore: how likely is a recovery in 2022? And to what extent will a recovery recoup the losses of those unfortunate investors?

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Headwinds

Fundamentally, the main cause for concern for any prospective or current investor in International Consolidated Airlines Group is the high level of uncertainty that is associated with the Aviation Industry through the age of coronavirus.

As shown recently with the reporting of Omicron, sudden news on incoming variants and speculation surrounding their severity can cause sudden panic and as a result vast movement in share price (moving 17% in the final five days of November following Omicron reporting).

As investors are quick to pull out their money with the fear of a worsened pandemic and the negative impacts this brings to world travel (and the potential for both revenue and profits…), shares of International Consolidated Airlines Group are certainly vulnerable to short-term shocks.

This vulnerability to shocks and the associated volatility is one reason why large-scale recovery is yet to be seen in the share price of International Consolidated Airlines Group.

Tailwinds

The short-term volatility that has suppressed recovery presents a ripe opportunity to me as a Foolish investor with a long-term view. With the world finally opening back up for business, with my optimism about global travel – this is a no-brainer.

After two years of travel restrictions, many countries simply cannot afford to close themselves off to tourism for much longer. It does seem that global travel will return closer to pre-pandemic normality. With that, surely comes a return for associated companies e.g. International Consolidated Airlines Group and Rolls-Royce.

In addition, the fundamentals of International Consolidated Airlines Group have not changed since before the pandemic. I believe this is still a well-run company with the systems in place to remain an industry leader for years to come.

Conclusion

In essence, International Consolidated Airlines Group is a business that was harshly affected by the pandemic and the associated reduction in global travel, now affected by uncertainty and volatility-fearing investors steering clear from the industry. However, with a long-term view, International Consolidated Airlines Group presents a huge opportunity. The fundamentals of the business have not changed and the world is opening up. Its shares are grossly undervalued… potentially now is the time for me to get in.

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Tommy Williams 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.

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