Business & Investment

Will IAG’s share price rise in September?

British Airways Owner International Consolidated Airlines (LSE: IAG) Stock prices have fallen by more than 25% since March. After adjusting for a rights issue last year, the value of the stock is only 15% higher than it was a year ago.

I think this is an opportunity to buy, as flight activity is increasing as the pandemic is mitigated. We are reviewing the IAG for more details.

Reasons to be cheerful

I don’t think IAG is clear yet. But I can see some reasons for being cheerful.

Group airlines flew only 22% of their 2019 capacity in the second quarter of this year. However, flight is expected to rise to 45% of 2019 levels during the third quarter. It seems to me a sure step back to normal.

IAG’s cash position is also strong, with € 10 billion in cash available at the end of June.

Finally, equity-covering analysts expect the business to return to profitability from 2022. Next year’s projected net profit of € 650 million is only a small part of the € 1,715 million profit reported in 2019, but I think it is enough to bring the business back. On a sustainable foundation.

Why am i still worried

One of the biggest complaints for British Airways management today is that most non-US citizens traveling from the UK are now Entry into the United States..

IAG has no control over these restrictions or other Covid-19 measures. This makes it difficult for airlines to plan their flights efficiently.

This is of particular concern to me, as transatlantic flights have historically been the busiest and most profitable for British Airways. I think businesses will continue to be under pressure until the US travel ban is relaxed.

IAG Stock Price: Cheap or High?

I think IAG airlines will fully recover in the next few years. But I think much of this is already priced on stocks.

Surprisingly, today’s IAG rating is higher than it was before the pandemic. This can be confirmed using an index called corporate value (EV). This measurement is calculated by summing the market value of a company’s stock and its net liabilities. EV indicates the amount of money a buyer must spend to fully purchase the entire company.

The corporate value of IAG was approximately £ 16.5 billion at the end of 2019. Currently £ 18.4 billion. This tells me that today’s business is more valued than it was before the pandemic.

There are two reasons for this amazing situation.

First, IAG’s net debt increased from £ 6.5bn to £ 10.3bn from the end of 2019. This will add £ 3.8 billion to the EV.

The second reason is that IAG will issue nearly 3 billion new shares in 2020, Rights issue.. These new stocks have doubled in price since they were issued at around 80p. This raised the group’s market capitalization.

Will IAG’s share price rise in September? I don’t know the justification for this to happen. The business has already been valued above pre-pandemic levels, but profits are not expected to return to 2019 levels by 2023.

In addition to this, the IAG should prioritize debt repayment and limit the likelihood of dividends.

In my view, IAG stocks are expensive and could fall further after September. Not purchased at the current level.

Roland Head There are no positions in any of the listed shares. Motley Fool UK does not have a position in any of the listed shares. The views expressed about the companies in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by examining different insights, Better investors than us.

Will IAG’s share price rise in September? Will IAG’s share price rise in September?

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