Interactive Investor

IAG and JD Sports gain on recovery hopes

11th August 2021 13:12

Graeme Evans from interactive investor

Our equities writer rounds up the top action in the FTSE 100 today.

Support for the recovery at International Airlines Group (LSE:IAG) and a potential 30% upside at high-flying JD Sports Fashion (LSE:JD.) put the pair on the radar of investors in the FTSE 100 index today.

IAG rose 2% as Liberum's respected transport analyst Gerald Khoo backed the British Airways and Iberia owner in a note declaring that the shares are now at an attractive entry point.

Trading conditions have been much kinder for JD Sports, but Goldman Sachs believes there's still more to come from the fast-growing transatlantic retailer after the US bank raised its guidance for 2022 profits by 7% to £650 million and lifted its target price by 20p to 1,220p.

That compares with the all-time high of 985p in early July and the 965p seen at lunchtime today after the stock rose 3% or 25p in the FTSE 100 index.

Goldman said its target price is based on a multiple of 23 times 2023 earnings and reflects more evidence of strong trading in the UK.

Its expectations are now for revenues growth in JD's home market of 40% in the first half of the financial year, against 20% previously thought.

The North West-based retailer, which started life with one store in Bury in 1981, now has over 2,600 outlets worldwide and is generating annual sales of more than £6 billion.

About £1.8 billion of this figure comes from the US, where the sportwear giant Nike (NYSE:NKE) and other chains have reported that post-lockdown trading has been particularly strong.

In contrast, the outlook for the airline industry remains uncertain due to it being one of the last sectors still subject to pandemic-related restrictions.

That's reflected in today's note by Liberum's Khoo, who has cut his forecasts for IAG revenues this year by 16% to 8.6 billion euros (£7.3 billion) to reflect weaker capacity in the third quarter.

He said: “While we had been cautious in our assumptions to travel restrictions being eased for the summer, and there has been a significant relaxation in many cases compared with Q2, the overall trend has still been disappointing.”

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