In the eventful year of 2024, IAG (Lse: iag) shares experienced an incredible surge, catapulting the airline group to the title of the FTSE 100’s top performer. The company emerged from the shadows of the pandemic with remarkable earnings that exceeded market expectations, signaling a strong comeback.
As we embark on a new year, 2025 has presented a rockier start for the owner of British Airways and Iberia. With a nearly 20% decline since its peak in February, investors are left wondering if the party is over for the IAG share price, or if it is merely gearing up for another upward trajectory.
Let’s delve into what industry analysts are foreseeing with the current stock price of £2.94 as of today, 19th March.
- The stock’s next destination:
The overall consensus forecast for IAG shares remains positive, indicating an anticipated growth in share price compared to the previous year. While the rate of growth is expected to taper off from the meteoric rise of the past, the median 12-month price target set by brokers for the stock stands at £4.03, implying a substantial 37% upturn from the current level.A diverse range of opinions exists among institutional analysts with varying levels of optimism for the company, as shown below:
- Buy: 6
- Outperform: 7
- Hold: 4
- Sell: 1
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Strong sell: 0
High-end predictions from Panmure Liberum foresee IAG shares climbing to £5 in the upcoming year, fueled by buoyant travel demand and lower jet fuel costs. Conversely, Barclays analysts took a more cautious stance by revising their price target down to £2.50, citing competition risks and recent profit warnings as factors influencing their outlook.
These divergent forecasts underscore the unpredictable nature of the stock market and emphasize the importance of conducting thorough independent research alongside analyst opinions.
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My Verdict:
Aligning with more upbeat projections for IAG shares, I hold a positive outlook on the company’s future trajectory. While a £5 price target may seem ambitious, I am confident in the potential for continued growth in the months ahead.The current undervaluation of the stock presents an attractive opportunity for investors. With a forward P/E ratio below 5.5, IAG stands out as a compelling investment choice compared to the broader FTSE 100 average and the airline sector as a whole. Notably, other aviation shares like easyJet and Wizz Air trade at higher multiples of 6.9 and 7.1, respectively.
Noteworthy is the company’s ongoing modernization efforts within British Airways, which have yielded positive results. A significant investment of £7 billion in IT infrastructure and workforce expansion has paid off, as evidenced by a 22% surge in operating profit to a record €4.3 billion during FY24, surpassing analyst expectations.
While challenges persist, particularly in the realm of weakening business travel demand, IAG remains proactive with a new €1 billion share buyback program and a reinstatement of dividends. These initiatives, coupled with resilient earnings, position the airline group for continued growth and investor interest in the foreseeable future.
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