So far, 2021 has been very good to shareholders in International Consolidated Airlines Group (LSE: IAG). The IAG share price has soared like a jumbo jet in 2021, delivering bumper returns for its owners. But how much further can this flight continue?
The IAG share price collapsed in 2020
At its five-year peak, the IAG share price hovered around £5 in late-June 2018. Although that was less than three years ago, it must feel a lifetime away to IAG shareholders. However, even as late as mid- January 2020, the shares were trading around 460p. Then, as Covid-19 infections swept the globe, the Anglo-Spanish airline’s stock came crashing to earth.
Over the next nine months, the IAG share price was almost in permanent free-fall. On 25 September 2020, it plunged to an intra-day low of just 86.54p, before closing at 94.64p. Alas, by 29 September, it had slumped to a new closing low of 91p. The owner of British Airways, Iberia, and Aer Lingus appeared to be on its knees. But good news was just around the corner…
Airline stocks soar since Halloween
In early November, the light at the end of the tunnel for IAG shareholders finally arrived. The unveiling of several highly effective Covid-19 vaccines sent bombed-out stocks skyrocketing. In the six months since then, the UK shares that have gained most have largely been ‘value’ and ‘recovery’ stocks. And, given its horror-show performance in 2020, it’s no surprise that the IAG share price has been one of the biggest winners of the past half-year.
As I write, the IAG share price hovers around 202p, valuing the group at £10.1bn. That more than doubled 2020’s closing low of 91p, for a gain of 122% in just over seven months. It’s also more than a quarter (26.4%) above the 159.8p at which the shares closed 2020. Here’s how the stock has risen over three recent timescales:
As you can see, the IAG share price is up more than a third (36.9%) in the past three months. For the record, this makes it the best performing share in the FTSE 100 index since 5 February. Unfortunately, over longer periods, the stock has been a washout. Over two years and three years, it has almost halved (down 42.7% and 52.1%), and has crashed two-fifths (-40.1%) over five years.
After a disastrous 2020, IAG is a prime recovery candidate
In 2019, IAG’s revenues hit a record €25.5bn. With airmiles flown collapsing in 2020, yearly revenues plunged to €7.8bn. As a result, net profit reversed from €1.7bn in 2019 to a loss of €6.9bn for 2020. Last year, the group flew 31.3m passengers, 87m fewer than 2019’s 118.3m. To get back to those highs, the number of passengers will have to quadruple from 2020’s rock bottom. Likewise, for the IAG share price to return to former glories, air travel will need to recover to pre-Covid-19 levels.
Do I think there’s room for the IAG share price to go higher on good news? You bet I do. After all, it hit 222.1p on 16 March, its intra-day high for 2021. But would I buy the stock at current levels? Maybe, but like this Foolish colleague, I’m uneasy. I’m an old-school value hunter, so I tend to leave growth and recovery stocks for other investors. But I do believe that if a global economic boom does take hold, then IAG could be a big winner from any sustained rebound!
Cliffdarcy 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.