Wednesday was a good day for International Consolidated Airlines Group (LSE: IAG). The IAG share price closed up 8.64p (+5.4%) at 169.1p, on a strong day for the wider FTSE 100 index. However, shares in the owner of British Airways have performed poorly since peaking in mid-March. What might turn around this sliding stock?
The IAG share prices plunges, then soars
2020 was a horrible year for airline shareholders. The IAG share price ended 2019 flying high at 625p. It climbed even higher, peaking at an intra-day high of 684p on 17 January 2020. But then Covid-19 swept the world and air travel ground to a halt. With passenger air miles collapsing by four-fifths, IAG stock went into freefall. By 14 May 2020, the shares had crashed to a low of 159.25p, down more than £5 in four brutal months. But the worst was yet to come.
As Covid-19 infections took off, travel restrictions and lockdowns returned last Autumn. Thus, the IAG share price went into freefall again. On 25 September 2020, the shares bottomed out at 86.54p — an unthinkable level just eight months earlier. But then airlines got a huge shot in the arm. ‘Vaccine Monday’ (9 November 2020) brought news of two effective vaccines against coronavirus, followed by a third shortly afterwards. This good news sent a wave of relief washing over shell-shocked investors, sending UK shares and US stocks soaring skywards.
From November, the IAG share price hardly paused for breath. It ended 2020 at 159.8p and continued this upward trajectory into 2021. At its 2021 peak, IAG stock hit 222.1p on 16 March. This left the airline’s shares up nearly 136p (+156.6%) from their 2020 low. As comebacks go, IAG’s ascent was like that of a fighter jet scrambling!
What next for the share price?
Perhaps the IAG share price went too far, too fast in Q1, because it has since crashed back to earth. At yesterday’s closing price of 169.1p, the stock has lost 53p and 23.9% since mid-March. On 9 June, and with the shares trading at 204.5p, I said, “I’d need to see clear signs of recovery before [IAG] goes on my buy list”. Since then, the stock has lost over 35p, dropping 17.3%.
I don’t own IAG stock at present, but would I be interested at this lower entry price? Maybe. Though, to be honest, I see the IAG share price today as a binary bet on the outcome of the battle against Covid-19. If global vaccination numbers keep rising and suppress viral infections, then this would be a huge win for humanity (and for IAG). Likewise, strong global growth, receding inflation and ultra-low interest rates would all support this economically sensitive stock. In this optimistic scenario, I could see the market value of IAG adding several billions to its current level of £8.4bn.
That said, the downside is obvious. If the war against coronavirus turns into a gruelling marathon, then ongoing air-travel restrictions would be very damaging for airlines. In a bumpy, turbulent ride, the IAG share price may become very volatile once again. In summary , I do expect to see the IAG share price considerably higher in 2021/22. However, I await IAG’s half-year results on 30 July with interest!
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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.