After climbing 20% in March, what next for the IAG share price?

Warren Buffett has bought airline stocks and sold them too. Looking at the IAG share price, should investors consider buying now?

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The International Consolidated Airlines (LSE: IAG) share price has had a cracking month, gaining 20% in March.

After the horrible time the business has had, we’re still looking at a 66% fall in five years, mind.

But what’s been cheering the market up regarding the stock in the past few months? I see a few things.

Sentiment

I really do think sentiment towards the aviation business is finally starting to come good. Well, we did see a brief spell of optimism back in early 2023, but it didn’t really catch on.

But this time, I see a few fundamental differences. We’re emerging from a period of high inflation, with cost rises slowing fast. A year ago, we we really only just starting to see the inflation pain.

No sooner had we started to come out of the Covid pandemic, then people were more worried about paying their mortgages than spending cash on flying off in search of sun.

At this point in 2024 though, forecasts do seem to make the stock look cheap.

Forecasts

What do they say? Here’s a look at how the City folk think things might go, compared to 2023 results:

YearEarnings
per share
P/E ratioDividendDividend
yield
202345.3p3.90p0%
2024 (f)43.1p4.14.5p2.5%
2025 (f)47.5p3.77.6p4.3%
2026 (f)51.0p3.59.3p5.3%
(f = forecast. Sources: Yahoo!, Market Screener, company accounts)

The price-to-earnings (P/E) ratios and dividend yields in the table are based on the share price at market close on 28 March — but it’s still about the same as I write, at 171p.

Does this make IAG a good stock to add to my 2024 Stocks and Shares ISA?

For years I’ve kept well away from airline stocks, as I’ve just seen too much risk. That’s even when they’re cheap. And even when hindsight has shown we’ve had good times to buy.

I’ve prefered to follow the Warren Buffett idea that “it’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

Wonderful?

But hang on, Buffett has bought airlines. In the past, he’s put billions into Delta, United, American Airlines, and Southwest.

But he’s since dumped them and walked away from the business. And he’s famously said: “If a capitalist had been present at Kitty Hawk back in the early 1900s, he should have shot Orville Wright. He would have saved his progeny money.

If someone with Buffett’s experience running Berkshire Hathaway and his astounding success has this much trouble with the industry, what are the chances of someone like me getting it right?

Tempting, but…

Hmm, those low forecast P/E values, and the prospect of a 5% dividend yield in a couple of years…

But, back to Buffett: “I have an 800 [free call] number now that I call if I get the urge to buy an airline stock. I call at two in the morning and I say: ‘My name is Warren and I’m an aeroholic.’ And then they talk me down.”

I’ll put my money elsewhere. Even though I expect the IAG share price to have a good 2024.

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.

Alan Oscroft 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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