Interactive Investor

When will IAG shares begin a real recovery?

This airline has been a huge disappointment since the pandemic, underperforming rivals. Independent analyst Alistair Strang explains what he needs to see to believe a sustainable recovery is underway.  

8th February 2024 07:18

Alistair Strang from Trends and Targets

One of the baseline positions we take in deciding how well a specific share is doing is pretty simple. Is it trading above its price level, pre-pandemic? If so, some slight optimism becomes possible, but the other stance also has merit. How has it performed since the pandemic drop and are their any signs of recovery, and hopefully a bottom?

The chart below for International Consolidated Airlines Group SA (LSE:IAG) would be funny, aside for the fact it represents what’s happened to the funds of real people!

Source: Trends and Targets. Past performance is not a guide to future performance.

British Airways owner IAG enjoyed a dreadful pandemic as shown above, their share price steadfastly refusing to do anything useful. At a glance, there are a couple of hints it may have bottomed, but such an attitude is only a negative news report away from being proven utterly wrong.

Our preference, always, is to await a price actually making positive movements before daring to express optimism. After all, there is absolutely no rule that says a share price should bounce. Rather often, absence of a bounce can be indicative the market knows/suspects something investors are unaware of, so perhaps it can prove worthwhile to either look elsewhere or, as we’ve done in this instance, take a look at the wider marketplace.

Currently, IAG's share price is at just 22% of its level before the pandemic hit. easyJet (LSE:EZJ), also suffering, is not in such a pained position, with their share price at 37% of the pre-pandemic price. Across the Atlantic, Delta Air Lines Inc (NYSE:DAL) is at 67% and American Airlines Group Inc (NASDAQ:AAL) at 48% of their pre-Covid price. And bad boy on the block JetBlue Airways Corp (NASDAQ:JBLU) appear to be languishing at just 27% of their value before everything went wrong in February 2020. But visiting Germany discovers Deutsche Lufthansa AG (XETRA:LHA) soaring, their share price now at 80% of their pre-pandemic price.

This level exercise tends to hint quite strongly that airline stocks can certainly recover and, from a European context if Lufthansa is to be believed, quite strongly. We’d warn that our six company samples is far from representative of the entire industry, it was just a collection of the more famous airline company names.

Somehow or other, in the test of values, the cruise line Carnival (LSE:CCL) was included and even they are at 36% of share value before the virus hit. In other words, doing a lot better than the British Airways’ owner.

Quite why IAG is at the bottom of the heap in this tuppenybit survey, especially as airlines appear to be flying again and fuel costs are reversing, escapes us. It may just be the case the market is awaiting IAG announcing a return to paying dividends or giving away enhanced air miles to folk who work on the stock market. Who knows, a quick glance at Google News didn’t reveal any immediate quick answer for us to regurgitate as something of interest.

About the only nice thing we can say about IAG is their share price failed to drop to our miserable “bottom” level around 81p as speculated in 2022. Instead, it hit 90p, since recovering in an extremely half-hearted manner. However, it certainly appears what should be a valid downtrend (Blue) has formed, hopefully capable of giving us trigger levels for proper movement upward.

Currently, above 162p (Blue) should hopefully prove capable of triggering price recovery to an initial 175p. We would regard closure above such a level as significant for the longer term, ticking a pretty big box suggesting IAG has commenced some real recovery. In such a case, closure above 175p should mark the dawn of an age, where a future 288p becomes a believable target with a third level of 362p calculating as viable, along with almost certain hesitation.

But for now, watching British Airways is a bit like watching one of these runway de-icer machines, trundling along slowly under the snow glare of a scary Denver Airport whiteout, with little hope of ever becoming airborne. But this, of course, doesn’t mean anyone should stop watching them, or even IAG share prices.

Should everything intend to go wrong, below 138p looks troubling, capable of commencing a descent to an eventual bottom at 87p.

Source: Trends and Targets. Past performance is not a guide to future performance.

Alistair Strang has led high-profile and "top secret" software projects since the late 1970s and won the original John Logie Baird Award for inventors and innovators. After the financial crash, he wanted to know "how it worked" with a view to mimicking existing trading formulas and predicting what was coming next. His results speak for themselves as he continually refines the methodology.

Alistair Strang is a freelance contributor and not a direct employee of Interactive Investor. All correspondence is with Alistair Strang, who for these purposes is deemed a third-party supplier. Buying, selling and investing in shares is not without risk. Market and company movement will affect your performance and you may get back less than you invest. Neither Alistair Strang or Interactive Investor will be responsible for any losses that may be incurred as a result of following a trading idea. 

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