Euro barrier hinders IAG’s take-off in the stock market | financial markets

International Airline Group, the holding company of which Iberia and British Airways are part, faces a €2 equity market hurdle that has yet to be overcome. Since it fell sharply at the start of the pandemic (due to mobility restrictions), there has been a trend that has repeated in these roughly three years: stocks hover around the eurozone and fail to advance much further.

Shares of the airline are up on the stock market nearly 36% so far this year, and are trading at just under 2 euros, still far from 5 before the pandemic. First-quarter results were better than expected, thanks to lower fuel prices (fuel accounts for a third of all airlines’ total costs) and strong demand for international leisure.

The flights in Spain, Latin America and the United States enabled it to reach an interest rate of €9 million in the first quarter (a figure unprecedented in Iberia), making the group “one of the most profitable in the market”, according to Sabadell. Net debt decreased by 2,000 million euros to 8,400 million.

Before the start of the summer season, 80% of the expected income is booked for the second quarter of the year. Banco Sabadell notes that a good start to the year and prospects for improvement are enough to buy. The company improves its price target by €2.40 per share (compared to the current price of 1.89), which indicates an upside potential of 27%. The Bloomberg consensus is mostly supportive of multinationals, with 63% of analysts recommending a buy, 29.6% holding the portfolio and 7.4% selling.

Bank of America is one of the companies recommending the purchase of IAG. It raised its estimate of the bonus money for the year by 20%, to €2,600m, with a valuation of €2.8 per share. And the American bank adds: “The decrease in net debt should eliminate investor concerns about the risks of a potential capital increase.” For XTB, the key is the resistance at €2 per share, which it believes will be difficult to overcome in the short term. Many investors are concerned about the impact of recent interest rate increases, as they believe they will negatively affect consumption. Therefore, at this price level, we will only wait to buy if there is a clear breakout of resistance, as it could lift the potential medium-term upside to €2.30 per share,” they explain.

AlphaValue analyst Yi Zhong more cautious about the potential of IAG shares. He believes most of the positives — such as lower fuel costs or higher travel bookings — have already been priced into the current share price, especially after the sharp rally last fall. “A potential acquisition of TAP could be a contributing factor, but the possibility does not seem high at the moment,” they add.

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