International Consolidated Airlines Group (LSE: IAG) shares doubled in value last year, making them the top-performing stock on the FTSE 100. I watched their spectacular rally with a mix of awe and regret. By the time I seriously considered buying IAG, as it’s generally known, it felt like the chance had gone.
But this year has been different. After Donald Trump’s ‘Liberation Day’ on 2 April triggered a global tariff war, the stock plunged back to earth.
I had a few thousand pounds sitting in my self-invested personal pension (SIPP) and, this time, I didn’t hesitate. On 10 April, I snapped up shares in the British Airways owner at 259p a pop.
Unmissable buying opportunity?
It felt like I’d been handed a second shot. The same factor that made the stock soar last year, the recovery in transatlantic flying, became its undoing as fears grew of US islationism and recession. It looked like a handy entry point, with International Consolidated Airlines Group stock trading at a price-to-earnings ratio of 5.5.
The shares looked staggeringly cheap, even accounting for the turbulence still to come. I’m under no illusions. Aviation is a risky business at the best of times, and especially today.
Rising revenues
Full-year 2024 results published in February showed signs of strength, with revenue up 9% to €32.1bn. Passenger numbers and aircraft utilisation also improved, while British Airways accounted for more than half the group’s total revenue.
Granted, profit margins slipped slightly to 8.5%, mostly due to rising costs. That’s something to keep an eye on. But overall, the business was flying. But 2025 is a different world. International Consolidated Airlines Group is right on the frontline of the trade war, with tourists suddenly wary of visiting the US, and businesses rethinking their plans.
The Q1 2025 update is due on 9 May, and that may give us an early glimpse of how the company is navigating the new reality.
The airline sector remains exposed to sharp movements in oil prices and currency shifts. Today’s falling oil price may help cut costs. Howver, the foreast dip in the US dollar could hit revenues once converted back into sterling. All it takes is one uncomfortable headline to knock the stock off course, and we’ll no doubt have plenty of those.
Dividends and potential growth
The median IAG one-year share price forecast from 25 analysts currently stands at just under 380p. From today’s price of around 263p, that would mark an increase of nearly 45%. With dividends restored and a projected yield of 3.4%, my total return could push towards 50%, assuming those predictions play out. I can dream, can’t I?
Forecasts aren’t promises, especially in times like these. Most of those estimates were likely made before the April sell-off. I think International Consolidated Airlines Group’s return to form could take a lot longer than that. Time will tell. I’ve made my move. I’m happy to hold and wait.
Others may see the recent drop as an invitation to climb aboard. The dip looks like a second chance for investors who have also been considering this recovery stock. It demands a strong stomach though. I’ve fastened my seat belt. I’m in this for the long haul
