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Why are IAG shares falling?

IAG's share price has dropped some 8% in the last one week.

  • IAG share price closed 4% lower on Tuesday (14 September 2021)
  • Shares fell another 1.6% on Wednesday morning to 140 pence
  • The airline’s stock has been steadily declining since the European Union proposed to reimpose travel restrictions on the US
  • Despite this, 21 out of 29 analysts polled continue to rate IAG a ‘buy’
  • Feeling bullish or bearish about IAG shares? Open an account with us to go long or short on the stock.

IAG stock price drops 8% in one week

Shares of International Consolidated Airlines Group (IAG) fell another 4% to finish at 142.40 pence on Tuesday.

The Anglo-Spanish airline holding company - which owns carriers such as British Airways, Aer Lingus, and Iberia - has seen its stock decline 8.3% in the last five trading sessions.

The relentless downtrend has come amid an ongoing rout of travel stocks after European Union (EU) states said they would recommend reimposing travel restrictions on American tourists.

EU governments agreed to remove the US from their safe travel list, following a surge in new Covid-19 cases. Airlines and travel firms had been calling for a full reopening of lucrative transatlantic routes.

By comparison, fellow London-listed airline easyJet saw its share price plunge by over 12%, although that was also in part due to its rejection of a takeover bid by Hungarian discount carrier Wizz Air Holdings.

Why are analysts still bullish about IAG?

Overall, IAG shares remain in bearish territory, having lost over 13% of its market cap in the last one month alone.

The latest market research shows that out of 29 analysts, 21 rated IAG shares ‘buy’, seven suggested ‘hold’, and one recommended ‘sell’. Their average 12-month target price stood at 230.53 pence per share, according to Bloomberg data.

Bullish research teams with ‘buy’ or ‘overweight’ calls included Barclays with a 230p target, Liberum with a 215p target, and Credit Suisse with a 256p target. HSBC suggested ‘buy’, but cut its target to 220p, from 240p.

Some research teams are seeing ‘attractive valuations’ for UK airline stocks, which had been volatile of late amid concerns of new travel curbs, Reuters reported.

Credit Suisse analysts believe IAG has about four more years of cash-burn coverage and thus should not need to raise equity this year.

However, IAG’s position ‘is heavily dependent on the transatlantic market fully reopening, meaning leverage may peak in late winter’, they wrote.

JPMorgan maintained a long-term ‘overweight’ rating due to IAG’s ‘very low’ valuation multiples, but flagged that IAG’s recovery could be slower than expected.

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This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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