Since I last wrote about British Airways owner IAG (LSE: IAG), the share price has seen an 11% recovery. After a generally positive set of H1 results, I could be tempted into buying the shares in order to capitalise on the potential upside.

IAG shows promise

IAG followed through on its Q1 guidance of achieving profitability in the second quarter. Q2 was, in fact, the group’s first profitable quarter since the start of the pandemic, with an adjusted earnings per share (EPS) of 2.5c.

It was also pleasing to see revenue per available seat kilometres (ASK) and passenger numbers edge closer to pre-pandemic levels. Aside from that, IAG managed to improve its financial position slightly, reducing its debt by €688m, while receiving positive free cash flow.

Therefore, the view of achieving operating profitability by the end of the year is starting to become a realistic possibility. All signs are pointing towards an increasingly promising rest of the year for the FTSE 100 firm.

Striking deals

Apart from the much improved financial performance of the company, IAG also managed to quash fears of future strikes. The company managed to strike a deal with 16,000 workers for a 13% pay rise this year. This should alleviate fears of last-minute flight cancellations, at least for the time being.

Nonetheless, not all is as smooth cruising as it may seem. This is because Heathrow Airport has opted to extend its cap on passenger numbers until the end of October, with no more than 100,000 travellers per day, leading to cancellations of tens of thousands of flights. As Heathrow is the hub of IAG’s most profitable airline, I’m expecting this to impact H2 results.

As a result, CEO Luis Gallego revised the company’s outlook downwards. IAG now expects capacity to hit 78% of 2019 levels, as compared to the previous 80% that IAG had expected. From this, North Atlantic capacity (IAG’s most profitable routes) is now expected to hit 92% of 2019 levels in Q3, compared to the previous guidance of 95%.

Having reservations

While the future outlook for IAG still remains rather promising, I have my reservations regarding its potential upside. Although passenger demand still remains strong, I’m fearful that it’s only a matter of time before sky-high inflation, and a potential recession on the cards, starts hitting consumers harder.

Furthermore, IAG’s long-haul recovery continues to lag that of shorter trips. The continued travel restrictions in large parts of Asia, specifically China, is hindering its growth potential. And with China sticking to its zero-Covid policy, this avenue doesn’t look likely to recover any time soon. Business travel also still continues to lag, only hitting 60% of its pre-pandemic volume. Moreover, as the winter months approach, I’m expecting the number of holiday travellers to start winding down.

Even though IAG shares have the potential to grow plenty, my optimism is hindered by a cloudy economic environment. Overall costs still remain high and, most importantly, the company still has a mountain of debt to pay off, which is expected to increase going into the year end. For that reason, I won’t be investing in IAG shares.

The post Should I be buying IAG shares today? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong 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.

The decline won’t seem to stop for IAG (LSE: IAG) shares. With the share price sliding to a one-year low, I might be tempted to see it as a buying opportunity. Nonetheless, given the state of its finances, I know it would be a high-risk, high-reward investment.

Terminal situation

IAG shares aren’t just trading at its one-year low. It’s also close to its five-year low of £0.91. What started off as a baggage system error last month has now evolved into something much worse. This is because staff shortages at airports have led to massive travel disruptions for British Airways, the biggest airline at IAG.

The airline had initially cancelled 650 flights in July, impacting over a 100,000 passengers. But to make matters worse, Britain’s biggest airline said today that another 10,3000 short-haul flights will be axed until the end of October. This is in part due to British Airways staff striking during the busiest period for the airline. Most of its check-in staff had received a 10% pay cut during the pandemic, but are yet to get their compensation fully reinstated.

This isn’t good news for IAG as it gets squeezed from both sides. Mass flight cancellations could result in the group falling short of its top line guidance. On the other hand, bigger paycheques to check-in staff will squeeze its bottom line even further.

The easy way out?

Sky-high inflation is starting take a toll on consumers’ wallets. Additionally, the Bank of England expects inflation to peak at 11% later this year. As such, consumers’ discretionary spending is expected to decline. Given that fares from airlines at IAG don’t exactly scream bargain, customers are more likely to turn towards budget airlines such as easyJet and Wizz Air. While its competitors also face a similar number of cancellations, they offer cheaper fares on average. This brings better value proposition to customers.

Delays expected for IAG

When IAG unveiled its Q1 results, it mentioned its aspirations to achieve operating profitability by Q2. However, given the current state of affairs, I view this to be highly unlikely. And even if it does manage to achieve such a feat, I don’t expect it to last for the rest of the year. Therefore, I anticipate delays on its route back to profitability.

More worryingly though, IAG has a mountain of debt (€19.6bn) to deal with. It doesn’t help either when its debt isn’t covered by its current operating cash flow nor its cash and equivalents (€7.9bn). If the FTSE 100 firm can’t deliver on its repayments, it’ll have to risk refinancing its debt, making repayments more expensive. This will likely sour investor sentiment further.

IAG shares are a in precarious position at the moment. There doesn’t seem to be light at the end of the tunnel and its balance sheet is in tatters. Moreover, its share price seems to be only going in one direction for the time being. Nevertheless, a report from Bloomberg stated that British Airways is nearing a deal with unions, which could mitigate staffing shortages and turn the airline’s fortunes around. That being said, I still won’t be buying IAG shares for my portfolio as I view it as too high of a risk. Instead, I’ll be investing in other companies that have better fundamentals.

The post Should I buy IAG shares if the price drops below £1? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong 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.

International Consolidated Airlines Group (LSE: IAG) shares are currently trading at £1.15, and are down 25% this year. Given the current economic landscape, its stock could be in further trouble, and here’s why.

Excess baggage

From Covid, to inflation, and now airport disruptions, the travel industry can’t seem to catch a break, and this week has been one of the more disruptive ones. Staff shortages, technical difficulties, and rail strikes have served up a perfect dish of chaos for IAG.

On Monday, Heathrow Airport suffered a widespread problem with its baggage system. As a result, Heathrow requested airlines to cancel 10% of their flights from Terminals 2 and 3. Although IAG’s main hub is located at Terminal 5, this still affected the limited number of IAG services at T2 and T3.

To make matters worse, Gatwick Airport capped its daily operations to 825 flights a day in July, and 850 flights a day in August, due to staff shortages. This has led to delays and flight cancellations, with easyJet suffering the brunt of it. Nevertheless, I doubt IAG is spared from this as I’m expecting a number of its services to be impacted as well.

Three strikes and you’re out

Three weeks ago, British Airways check-in staff threatened to strike in July. This is because their pay has yet to return to pre-pandemic levels after salary cuts made during the pandemic. With the deadline fast approaching on 27 June, IAG is stuck between a rock and a hard place.

For one, the board could reinstate workers’ pay, but doing so would impact its already fine margins. To mitigate this, British Airways would have to increase its ticket prices, which might dampen demand and extend its route back to profitability.

On the other hand, not doing anything could be equally devastating. A lack of check-in staff might lead to further delays and cancellations, which wouldn’t be good for IAG shares. Seeing that British Airways is the group’s biggest revenue driver, a strike could impact IAG’s top line quite substantially.

Delayed departure

In its last trading update, IAG mentioned that it expects to achieve operating profitability by Q2. However, this seems to be increasingly unlikely. Apart from potentially having to fork out higher wages or lose millions in revenue, the FTSE 100 firm still has to deal with high oil prices.

Since its Q1 update, jet fuel prices have hit fresh new highs of $175 per barrel, which isn’t going to do its bottom line any favours. Additionally, the Consumer Price Index in May continued to hit 40-year highs at 9.1%. With fears of an impending recession, this is most likely going to dissipate the travel tailwind and send IAG shares even lower.

More importantly, IAG’s balance sheet is in a terrible state. Its debt-to-equity ratio sits at a staggering 2,318%, while its short-term assets can’t cover its short-term liabilities. Not to mention, its last reported free cash flow sits at -€885m. This rings alarm bells of a company that’s in big trouble. Therefore, I won’t be investing in IAG shares. Instead, I’ll be parking my money in other growth stocks that have better financials.

The post Could IAG shares be in further trouble? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong has no position in any of the shares mentioned at the time of writing. 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.

Up and away?

I would have expected the IAG share price to lift off after it reported a generally positive set of Q1 results last month. The group managed to recover a substantial amount of its losses to €731m from €1.1bn a year ago. Total revenue before exceptional items was up by a whopping 485% year on year (Y/Y).

In addition to that, total passenger numbers saw an increase to 14.4m, alongside a 72% load factor (A measure of how full a plane is). Most importantly, IAG expects its operating results to be profitable from Q2 onwards, which is great news for investors. So, why’s the stock stalling then?

Sky’s not the limit

The negative sentiment surrounding IAG shares can be attributed to passengers being warned of major delays this week. Workers are carrying out a ballot over a potential pay strike. Check-in staff at Heathrow airport said that the company has refused to reverse a 10% pay cut imposed on them during the pandemic. Meanwhile, management pay has been restored to pre-pandemic levels.

Trade Unite, the trade union representing these staff disclosed that the industrial action ballot covers around 500 staff, and is expected to close on 27 June. An unfavourable settlement would most probably lead to strikes in July, which is IAG’s busiest period of the year. With a bottleneck of queues already building up outside several UK airports, this could very well hinder IAG’s route to profitability in the short to medium-term.

To make matters worse, the group is also facing shareholder pressure over a decision to decrease CEO Luis Gallego’s share compensation. IAG’s annual general meeting is fast approaching, and shareholders are not very keen on awarding its chief executive after the company posted enormous losses during the pandemic.

Flying blind

Nonetheless, do the positive figures from the group’s Q1 report make IAG shares investible for me? I think not. The conglomerate’s balance sheet still remains undesirable, as its staggering amount of debt is not well covered by operating cash flow. Despite IAG reducing its debt levels by 0.6% last quarter, a potential slowdown in customers may undo its recovery.

I expect travel tailwinds to slow down in the coming quarters as economic headwinds start to take shape. Inflation in April came in at 9%, and with further interest rate hikes expected, I am doubtful that passenger numbers will continue recovering at the same pace.

Although the lifting of lockdowns in China should see passenger numbers rise in Asia, oil prices have also risen. Oil is now hovering around $120 per barrel and will definitely have a negative impact on IAG’s bottom line. This sparks fresh concerns as to whether the company’s guidance of achieving operating profitability by Q2 is still a realistic possibility. As such, I will not be looking to invest in the IAG shares. Instead, I’ll be looking to purchase other shares that could benefit my portfolio with more financial security.

The post The IAG share price is down 15%. Should I buy? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

John Choong has no position in any of the shares mentioned at the time of writing. 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.

Lloyds

As Lloyds (LSE: LLOY) continues its share buyback programme, the British bank has seen its stock price increase by 3% this week. A hawkish Bank of England has been stoking uncertainty surrounding Lloyds’ future. This arguably led to a number of director dealings happening this week.

Most notably, Lloyds’ CFO William Chalmers and Chief of Staff Janet Pope purchased a large number of shares. However, Group Corporate Affairs Director Andrew Walton and Scottish Widows Chief Executive Antonio Lorenzo also sold a substantial number of shares.

• Name: William Chalmers (Chief Financial Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 20 May 2022
• Amount purchased: 168,865 @ £0.44
• Total value: £74,409.46

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 884 @ £0.43
• Total value: £383.86

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: Disposal of shares
• Date of transaction: 20 May 2022
• Amount sold: 250,000 @ £0.44
• Total value: £110,062.50

• Name: Vim Maru (Group Director, Retail)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 31 @ £0.43
• Total value: £13.46

• Name: Janet Pope (Chief of Staff and Group Director, Sustainable Business)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022 and 20 May 2022
• Amount purchased: 85,633 @ £0.44
• Total value: £37,735.00

• Name: Stephen Shelley (Chief Risk Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 1,563 @ £0.43
• Total value: £678.70

• Name: Andrew Walton (Group Corporate Affairs Director)
• Nature of transaction: Disposal of shares
• Date of transaction: 19 May 2022
• Amount sold: 184,216 @ £0.43
• Total value: £79,986.68

IAG

The IAG (LSE: IAG) share price is up about 4% this week as the group announced a share buyback programme on Tuesday. Apart from that, a number of big director dealings occurred at IAG. Chairman and Iberia CEO Javier Sanchez-Prieto and CFO Nicholas Cadbury made the headlines. The latter had already received 1,473,207 shares as a part of IAG’s executive share plan, which will be vested in three tranches annually. Despite that, Cadbury still purchased more shares.

• Name: Javier Sanchez-Prieto (Chairman and CEO Iberia)
• Nature of transaction: Transfer of shares from one nominee account to another nominee account with no change of beneficial ownership
• Date of transaction: 23 May 2022
• Amount transferred: 181,014 @ Nil
• Total value: N/A

• Name: Nicholas Cadbury (Chief Financial Officer)
• Nature of transaction: Acquisition of shares
• Date of transaction: 24 May 2022
• Amount transferred: 254,979 @ £1.23
• Total value: £312,604.25

SSE

SSE (LSE: SSE) reported a decent set of numbers in its FY22 earnings this week. The firm generated profits of £1.5bn last year, and expects to make even more this year from high energy prices. But a windfall tax from the British government soured investor sentiment, sending the SSE share price down by almost 10%. Still, outgoing non-executive director Dame Angela Strank acquired a respectable number of shares.

• Name: Dame Angela Strank (Non-Executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 25 May 2022
• Amount transferred: 483 @ £18.49
• Total value: £8,929.14

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this article’s instance, Lloyds’ director dealings used the dividends they received on SIP shares to reinvest into further Lloyds shares. It should be noted, though, that dividend shares must normally be held in the trust for at least three years to get full tax relief. On the other hand, IAG’s CFO received free shares as part of his compensation package.

The post Director dealings: Lloyds, IAG, SSE appeared first on The Motley Fool UK.

More reading

• As the Lloyds share price falls while profits rise, is it time to dump?
• How much is needed in an ISA for an annual income equal to this year’s £12,547 State Pension?
• What next for Lloyds shares after better-than-expected Q1 results?
• Lloyds shares in the spotlight: how should investors navigate the latest drama?
• Here’s how Lloyds shares could climb another 50%… or crash 50%!

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group. 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.

The IAG (LSE: IAG) share price has had an excellent start to 2022, up 12%, as I type. I think there could be more to come.

IAG share price: ready to fly?

Let’s start with the obvious, namely the gradual removal of Covid-19-related restrictions. The move by Australia to re-open its borders to double-jabbed passengers, for example, is clearly a shot in the arm for the British Airways owner. After all, long-haul flights tend to be more lucrative. And as confidence returns, IAG’s revenue and profits should bounce back.

Another reason to like IAG is that it’s actually a collection of carriers: the aforementioned BA, Iberia, value operators Aer Lingus and Iberia Express, and low-cost LEVEL and Vueling. This diversification allows the company to cater to many/all traveller types, potentially giving it an advantage in the recovery.

A final reason relates to the FTSE 100 stock’s current valuation. Right now, the IAG share price is around 19% up on where it stood one year ago, giving the company a market-cap of £8.8bn. However, at 178p, the stock is also far below the near-500p level hit almost four years ago. From this angle, investors may consider that the company has great rebound potential.

Sure, no stock has the right to move higher and we should be wary of anchoring ourselves to a previous value. However, the recent rotation into value stocks (which IAG arguably is) may continue for a while yet, especially if interest rate rises come thick and fast.

What could possibly go wrong?

Having listed three reasons for being bullish on IAG, we might assume that I’m busy loading up on the stock? Actually, this couldn’t be further from the truth.

The fact is, the airline industry is a notoriously awful place to invest. The sheer amount of money needed to keep planes in the air means that returns on invested capital (a key quality metric) tend to be low, relative to companies in sectors such as consumer goods and software.

To paraphrase fund manager Terry Smith, companies that are able to reinvest profits at a high rate of return for many years tend to be the best stocks to own. The converse is also true.

Another issue is the level of competition any airline faces. While possessing multiple carriers might be in its favour, retaining passengers will still be a challenge for IAG, not to mention a costly exercise. This seems like a good time to mention the company’s significant debt pile.

On top of this, strikes by airline/airport staff, bad weather and terrorist activity all have the potential to impact trading. Naturally, the possibility of another Covid-19 variant lurking in the background can’t be ruled out either. This wouldn’t be such a problem for me if IAG paid a dividend but that probably won’t happen for a good while. 

Better buy

To summarise, I don’t doubt that there’s the potential to make money here. But this is most definitely not a business I’d want to own for years. For a Fool like me, that’s reason enough to avoid the stock. As an investor who adopts a ‘buy right and hold on’ mentality, IAG simply doesn’t tick enough of my boxes.

If I were to buy a travel-related recovery stock today, it would be (more of) this one. 

The post 3 reasons the IAG share price could lift off in 2022 appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

Paul Summers 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.

The International Consolidated Airlines (LSE: IAG) share price tumbled on Friday as investors recoiled from the news that a far-more-powerful variant of the coronavirus had been found in Southern Africa. 

As I type, the UK has suspended flights from six countries on the continent. By the time you read this, it could be more. If existing IAG holders are looking for crumbs of comfort, one might say that pretty much everything else — including other airline stocks, tour operators and hoteliers — fell in tandem.

So, where next for the British Airways owner? Well, no one can know exactly what will happen next. Even so, we can come up with a number of scenarios as to what could. For ease, I’ve gone to both extremes. 

The worst-case scenario

By far the worst possible turn of events for markets — and the IAG share price — is for evidence to emerge that the variant is running riot. As successful as the UK’s vaccination programme has been, the NHS was already trying to contain another outbreak of infections before Friday’s news hit. Any suggestion that the existing vaccines aren’t powerful enough will compound the issue. Perhaps worst of all, we won’t know for a few weeks. And the market isn’t partial to uncertainty.

Naturally, all this won’t do IAG any favours. As concerns mount, we can expect more travel restrictions to be imposed. That will put the already indebted FTSE 100 member under yet more financial pressure when it can least afford it. Add other concerns such as the prospect of interest rate rises and soaring prices to the mix and things could get very nasty.

On the other hand…

Now let’s ponder the best outcome.

News in December that the spread of this new variant has been contained would clearly be a good thing, as would indications that it’s not as strong as first thought (and/or existing vaccines can be quickly modified). I wouldn’t expect the new travel restrictions to be dropped. However, it may mean that recently reinstated (and lucrative) routes can stay open.  

Should all this come to pass, I’d speculate the IAG share price will bounce hard in December before levelling off as skilled (lucky?) traders take profits. What I believe is less likely to happen, however, is for any rise to be sustained. For me, there are simply too many unknowns ahead. Just knowing that another variant has been found highlights that IAG’s road to recovery will be long and hard. 

IAG share price: risk vs reward

Throughout the coronavirus crisis, I’ve steered clear of investing in airlines. Depending on the time period one selects, this has either been a huge mistake or a wise move. Between October 2020 and March 2021, for example, the IAG share price more than doubled. In the last six months, the same stock has lost a third of its value. Investing is hard.

As a committed Fool, I’m looking to make money from shares over the long term. From this perspective, there could be a place for IAG in my portfolio, especially if I were sufficiently diversified elsewhere. With a huge amount of quality stocks to choose from, however, I’m still hesitant, especially as others offer a solid dividend stream to boot. 

Will the IAG share price recover in December? I’m not counting on it.

The post Will the IAG share price recover in December? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

Paul Summers 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.

The IAG (LSE: IAG) share price has lost momentum recently. In fact, the stock has dipped almost 15% in the last five trading days alone. Will next month’s update on trading (5 November) help arrest this downward pressure? I’m torn. 

IAG share price: reasons to be bullish

One reason for thinking the recent turbulence may prove temporary is the ongoing lifting of travel restrictions. The forthcoming reopening of US borders to European travellers, for example, is clearly a good thing for the British Airways owner. This could/should inspire more previously-reluctant travellers to return to the skies. And evidence of this, in the form of increased bookings, not to mention talk of the company returning to profitability sooner than thought, could see IAG fly next month. 

As a sign that confidence is returning to the industry, BA recently announced that it was now looking to recruit new cabin crew in advance of huge expected demand next summer. Although the actual number of vacancies wasn’t made public, union Unite has recently told the Financial Times that it expected up to 3,000 people to be rehired by the business.

Other things that may boost the IAG share price include more details on plans for British Airways to provide a short-haul service from Gatwick. Once shelved but now seemingly back on track, this strategy has the potential to allow the company to snag a piece of the low-cost pie from peers like easyJet and boost its industry clout.

On the other hand…

The above all sounds promising. However, I don’t think there’s a shortage of reasons to think the IAG share price could remain volatile in November.

I wonder, for instance, whether the aforementioned removal of restrictions may already be priced in. Indeed, this is the reason given by broker Berenberg for recently reducing its target for the IAG share price to 200p from 230p. Yes, this would still imply a near-30% upside based on where the stock is now. Nonetheless, it doesn’t exactly scream confidence.

In addition, there’s also chatter that heavily indebted IAG will soon need to tap the market for more cash. Such a move would dilute existing holders. That’s not something any prospective investor hovering over the ‘buy’ button wants to see on the runway.

Perhaps in expectation of this, IAG was the third most popular sell on share-dealing platform Hargreaves Lansdown last week. Interestingly, it didn’t appear on the list of 20 most popular buys.

A simple bout of profit-taking? Perhaps. After all, the IAG is still up almost 50% in 12 months. Then again, the recent rise in Covid-19 infection levels could be prompting some holders to re-evaluate the airline’s outlook. Any suggestion that the UK government may be about to reintroduce measures designed to restrict the spread could be taken very badly by the market. 

Better buy

Of course, knowing exactly where stocks will go next is near impossible. Moreover, it’s simply not Foolish to buy anything based solely on a few months of trading and news flow. As a long-term investor with finite funds, I need to be confident that the IAG share price is capable of delivering better returns than I’d get elsewhere for years.

As things stand, I’m still not convinced. With arguably better prospects (and a cracking dividend), I’d feel more comfortable parking cash in this FTSE 100 stock instead.

The post Where might the IAG share price go in November? appeared first on The Motley Fool UK.

More reading

• Are IAG shares the ultimate FTSE 100 volatility play? 
• Up 55% and a P/E of 6.6, is this FTSE 100 share too cheap to miss?
• IAG share price vs budget rivals: which airline share looks better value in 2026?
• The red lights are flashing for this FTSE 100 share! Will it crash?
• After tanking 20% in March, is this a bargain-basement value stock?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

Let’s look a little closer at today’s best and worst-performing stocks, starting with the latter.

Today’s stock market losers…

In the FTSE 250, shares in animal genetics firm Genus were well out of favour. Despite the company revealing some very positive full-year numbers, investors didn’t like talk of a volatile pig market in China. Even the suggestion that this would be a “short term headwind” didn’t carry much weight. The Genus share price dropped 7.6%.

Budget airline easyJet was another heavy faller from the second tier, losing over 10% of its value by the close. This followed the announcement that the Luton-based business would be looking to raise £1.2bn from investors via a rights issue to boost its balance sheet. Also contributing to the tumble was news that the company had scorned a preliminary takeover approach. The identity of the potential buyer was not revealed but has since been rumoured to be peer Wizz Air. In today’s statement, easyJet said that it undervalued the business and the offer was unanimously rejected. 

Perhaps by association, FTSE 100 airline IAG was in the red. That’s despite yesterday’s rumours that the controversial traffic light travel system adopted by the UK government will be overhauled. Elsewhere in the top tier, Coca Cola HBC shed 4.4% of its value. DCC and Melrose Industries grabbed second and third spots, down 3.4% and 3.2% respectively. 

Morrisons slips as profits tumble

Back in the FTSE 250, takeover target supermarket Morrisons strayed into negative territory after revealing a 37% drop in profit over the six months to the beginning of August. The firm also announced a hit of £41m of Covid-19 costs and £80m in lost profit in sales from cafes, fuel and food-to-go. Despite reiterating previous guidance, it warned that rising costs in its supply chain could still impact near-term performance.

In other news, investors in online gambling firm 888 reacted negatively to the announcement that their company would be buying William Hill’s European business for £2.2bn. The deal would include 1,4000 physical shops. The former said that this purchase would give it “significantly enhanced exposure to sports betting“. But owners weren’t convinced. The shares slid by 3.3%.

…and winners

On a day that lacked any massive gainers on the FTSE 100, investment firm M&G and hotel company Whitbread were in demand. Housebuilders Persimmon and Barratt Developments held their own too. Despite falling back at the close, luxury brand Burberry also continued its gradual recovery. Investors had been dumping the stock recently following weaker-than-expected retail sales figures in China. The market is of huge importance to the FTSE 100 constituent.

Higher gains, however, could be found in the FTSE 250. Intellectual property business developer IP Group headed the second tier leaderboard with a 6.1% rise. It was closely followed by residential landlord Grainger, which managed 3.8%. Despite today’s lacklustre performance, The FTSE 250 has still managed to return 15.8% year to date, far more than the 6.9% achieved by the FTSE 100. 

The post Here’s what happened in the FTSE 100 and FTSE 250 today appeared first on The Motley Fool UK.

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Paul Summers owns shares in Burberry. The Motley Fool UK has recommended Burberry, Melrose, Morrisons, and Wizz Air Holdings. 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.

There are some FTSE 100 stocks that regularly feature on the list of most popular buys on investment platform Hargreaves Lansdown. Battered engineer Rolls-Royce and under-pressure International Consolidated Airlines often fight it out for the top spot, for example. Lloyds Bank is also one of the most traded shares on the London market. Last week however, it was the turn of another top-tier member.

That company was telecommunications giant Vodafone (LSE: VOD).

Vodafone shares: what’s the draw?

Vodafone shares might be attracting buyers for a couple of reasons. For one, the blue-chip looks pretty reasonably valued, at least relative to other stocks in the FTSE 100. At last Friday’s close, the £33bn-cap was trading at 14 times forecast earnings. 

A potential second reason is the dividend stream on offer. Analysts currently have the company returning the equivalent of 7.66p per share for this financial year (ending 31 March). That gives a giant yield of 6.4%. For perspective, there are only eight companies in the FTSE 100 offering more. Those cash payouts look even more tempting when you consider that even the best instant access Cash ISA offers a paltry 0.65% in interest.

On top of this, Vodafone is clearly making progress at an operational level. Its tower division — Vantage Towers — has now been spun off and listed. More recently, the company reported a better-than-expected 3.3% increase in service revenue over Q1. 

Lagging the FTSE 100 

As popular as Vodafone is at the moment, there are a few things I’d need to be aware of if I were to queue for the shares. The first of these relates to how likely it is that those dividend payouts may need to be reduced. 

Right now, that huge yield is covered only 1.1 times by profits. Ideally, I’d be looking for this ratio to be higher (twice-covered would be ideal). In addition to this, Vodafone’s net debt has ballooned in recent years. That could prove problematic if/when interest rates rise. 

There’s also the lacklustre share price performance to consider. Vodafone’s stock is up only 2% in value over the last year. The FTSE 100 index has fared better — rising 18%.

The long-term picture isn’t encouraging either. Since 2016, Vodafone shares have halved in value! Meanwhile, the FTSE 100 is up 5% and the S&P 500 index has more than doubled. 

All this highlights an issue that investors face when deciding what to buy. I don’t just need to question whether the rewards are worth the risk. I also need to think about what gains I may be giving up by not being invested elsewhere.

On this note, it’s interesting that Vodafone didn’t feature on the list of most popular sells at Hargreaves Lansdown last week. Perhaps many of those buying now are in for the long term? Over such as short period of market activity, it’s impossible to know.

Stay diversified 

Despite its recent popularity, I suspect it’ll take time for the Vodafone share price to really get going. For this reason, I’d only consider joining other investors and buying this FTSE 100 stock today if I were looking to build a portfolio focused solely on generating income.

Considering the potential threats to the dividend, I’d also make sure I was sufficiently diversified to ensure that any damage from a cut, should one come, is limited.

The post This FTSE 100 dividend stock was last week’s most popular buy appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Hargreaves Lansdown and Lloyds Banking Group. 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.