In 2024, IAG (LSE:IAG) shares nearly doubled in value and the airline group was crowned the FTSE 100‘s highest flier. Thanks to earnings that beat market expectations, the company awoke from its prolonged, pandemic-induced slumber with a bang.
However, the owner of British Airways and Iberia has made a turbulent start to 2025. Down nearly 20% since its peak in February, is the party over for the IAG share price? Or is it simply refuelling for another leg up?
Here’s what City analysts reckon with the stock trading at £2.94 today (19 March).
The stock’s next destination
Promisingly, the consensus forecast for IAG shares is positive. Although share price growth is generally expected to slow compared to last year, brokers’ median 12-month price target for the stock is £4.03. That would be a healthy 37% increase from today’s level.
However, beneath the headline consensus figure, there’s a wide range of opinions among institutional analysts covering the company. The table of expert recommendations below illustrates those differences.
| Recommendation | Number of analysts |
|---|---|
| Buy | 6 |
| Outperform | 7 |
| Hold | 4 |
| Sell | 1 |
| Strong sell | 0 |
At the upper end, Panmure Liberum analysts believe IAG shares could rise to £5 next year, citing resilient travel demand and lower jet fuel prices as reasons for optimism. If this prediction came to fruition, the airline stock would finally eclipse its pre-Covid level, marking a complete recovery from the pandemic.
On the other hand, Barclays analysts slashed their price target to £2.50 last week from a previous forecast of £4.20. Competition risks from low-cost carriers and recent profit warnings issued by multiple leading US airlines underpinned this gloomier view.
What’s evident from these wildly different outlooks is that no analyst has a crystal ball. Broker forecasts aren’t gospel. Investors should weigh expert opinions against their independent research and convictions.
My verdict
More bullish forecasts for IAG shares chime with my own view. A £5 share price target might be a bit steep, but I believe there’s a strong chance further growth could be achieved over the coming months.
The stock looks cheap, which bodes well for future returns. Trading at a forward price-to-earnings (P/E) ratio below 5.5, the business is attractively valued relative to the FTSE 100 average and the airline sector as a whole. Other UK-listed aviation shares, such as easyJet and Wizz Air, trade for higher multiples of 6.9 and 7.1, respectively.
Furthermore, the firm’s beginning to reap the rewards from a £7bn modernisation investment in British Airways. This two-year plan involves a significant cash injection in IT infrastructure and hiring extra staff.
In FY24, IAG delivered a 22% increase in operating profit to reach a record €4.3bn, exceeding analysts’ expectations for €3.7bn. A stellar performance for the UK flag carrier underpinned the group’s excellent earnings.
However, the company faces risks from weak business travel demand. In a world where virtual meetings have become commonplace, the group doesn’t expect corporate travel to ever return to pre-pandemic levels. Whether IAG can continue to fill business and first-class seats with leisure passengers remains to be seen.
Nonetheless, with a fresh €1bn share buyback programme to be implemented over the next 12 months and the resumption of dividends last year, there’s plenty to keep prospective investors interested.
