Even with the FTSE 100 trading near all-time highs, there are still plenty of quality value stocks for investors to pick from. And having just tanked by almost 20% in the last month or so, International Consolidated Airlines (LSE:IAG) might have just tumbled into discount territory.
The question now becomes, is this a buying opportunity for long-term investors or a warning to stay away?
What happened to the IAG share price?
The company’s recent share price crash has been driven by three overlapping factors that all hit at nearly the same time.
- Its 2025 full-year earnings beat expectations, but near-term guidance was murky alongside large planned capital spending, rattling investor confidence.
- The war in Iran erupted, sending oil and, in turn, jet fuel prices through the roof while also disrupting travel routes through the Middle East.
- The threat of new US tariffs applying pressure to UK and European economies – something that IAG’s highly sensitive to.
Combining these headwinds with the fact that IAG shares have actually been on a pretty strong bull run over the last couple of years, it isn’t surprising to see some investors lock in profits. And it’s also worth pointing out that even after this recent sell-off, the shares are still up more than 60% over the last 12 months.
However, as a result of this pullback, IAG’s price-to-earnings (P/E) ratio is now deep in value stock territory at just 6.1. And on a forward basis, the shares look even cheaper at a P/E of just 5.6.
So should investors take advantage of weakened sentiment to snap up what appears to be a screaming bargain?
Bull versus bear
Beyond an undemanding valuation, IAG’s business looks fundamentally impressive. As previously mentioned, its 2025 results firmly beat analyst forecasts, with margins reaching record levels. That’s paving the way for plans to return a jaw-dropping €1.5bn to shareholders in the next 12 months, starting with a €500m share buyback programme.
What about the surge in jet fuel prices? Here, there’s some valid concern. For context, the International Air Transport Association’s Jet Fuel Price Monitor shows that the weekly average cost per barrel of jet fuel on 27 February was $99.4. As of 27 March, it’s closer to $195.19 – a 96.4% increase in a single month, just as we approach peak summer travel season.
With a 62% fuel hedge in place, IAG does have some insulation against rising prices. But compared to many of its European peers and rivals, that level of hedging is actually lower than the 70%-80% average. And if the war rages on, 2026 could prove to be a disappointing year against 2025’s stellar results.
The bottom line
IAG’s seemingly in a tough spot. And subsequently, its recent sell-off into value stock territory makes a lot of sense. However, if the war in the Middle East is (hopefully) resolved promptly, then investors may indeed have overacted, creating a buying opportunity.
All things considered, the company remains shrouded in geopolitical uncertainty. And with other airlines seemingly being better equipped to absorb a protracted conflict, it might be worth keeping IAG on a watchlist for now.
