The Motley Fool

The IAG share price continues to slide. Should I buy now?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

New normal sign on desk
Image source: Getty Images

After printing a 52-week high of around 218 p in April of this year, the IAG (LSE: IAG) share price has been sliding. While the stock is up 23% over the past 12 months, it is down 17% since the beginning of April. 

This price action is particularly interesting because, over the same period, the outlook for the company has improved.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

As such, it is beginning to appear as if there is an opportunity here for risk-tolerant investors. 

IAG share price opportunity

Trying to pull apart the outlook for a complex company like IAG is not particularly easy. The firm, which owns airline brands across Europe, including British Airways, is being pushed and pulled in different directions

For example, while passenger capacity was only at 19.6% of 2019 levels in the first quarter of 2021, the group operated a record number of cargo-only flights. As a result, while passenger revenue was down 88%, cargo revenue for the period increased 42%.

Meanwhile, costs dropped dramatically. Overall, total spending was down 68% compared to the same period in 2020, leading to a much improved operating loss of €1.1bn compared to 2020’s €1.9bn. 

In the second quarter of the year, the company planned to operate around 25% of its 2019 passenger capacity. This implies the group’s operating performance will be much the same for that quarter of 2021 as it was for the first. 

But this means the company is on course to report another billion euro loss for Q2. I think this shows the scale of the challenge and level of uncertainty surrounding the IAG share price. 

The recovery in the airline industry is lagging far behind the rest of the economy. Nevertheless, there are green shoots on the horizon. 

Earlier this month, British Airways announced that it would participate in a “proving trial” to prove that it is “possible to quickly and easily verify those arriving into the UK who are fully vaccinated.” This should help the government build travel corridors with other nations.

What’s more, the government has just said fully vaccinated travellers will not need to self-isolate on their return to the UK from amber list countries as of 19 July.

This could be yet another shot in the arm for IAG and its peers. 

Valuation challenge

Despite these developments, placing a value on the IAG share price remains difficult. 

The problem is, the company is still losing money. It is challenging to value a business that is bleeding cash. At the same time, there is no guarantee if or when the enterprise will return to profitability. It could be in the last quarter of 2021 or not until 2023. It is just impossible to say at this stage. 

And until the company does return to profit, I think the IAG share price will continue to float around without direction. That means it could fall or even rise from current levels. 

Therefore, I am not going to be buying shares in the airline group today. I think there is just far too much uncertainty surrounding the outlook for the business.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.