Has the IAG share price hit rock bottom after a 20% drop in just one month?

IAG Share Price: A Second Chance for Investors

The IAG share price experienced a remarkable surge of doubling last year, crowning it as the best performer in the FTSE 100. Many potential investors may have initially felt they missed their opportunity to add the stock to their portfolio. But here’s the plot twist – a second chance has emerged. The shares in International Consolidated Airlines Group, the parent company of British Airways, Iberia, Aer Lingus, and Vueling, have recently plummeted by 20% in the last month. While still riding an impressive 80% increase over the past 12 months, this sudden drop presents a new opportunity for keen investors.

Why Should You Consider Investing in IAG?

1. The FTSE 100 Dip as a Buying Opportunity:
   • The global pandemic severely impacted IAG’s operations and increased its debt load. Consequently, the company’s share price, which previously had a low price-to-earnings ratio, skyrocketed.
   • However, with the US economy booming and an evident rebound in travel demand, particularly transatlantic flights, the company experienced a significant surge in its Q4 revenue and operating profit.
2. Back to Bargain Territory:
   • Despite concerns regarding trade tariffs and the fear of a potential US recession affecting transatlantic flight demand, IAG’s current price-to-earnings ratio suggests that the stock is undervalued compared to its earnings potential.
3. Dividends and Share Buybacks:
   • Investors are looking forward to dividends with a modest trailing yield that is forecasted to increase in the upcoming years.
   • However, the possibility of declining profits could impact these dividends and the progress in reducing the company’s debt, which remains substantial.
4. Analyst Projections and Future Outlook:
   • Market analysts have presented an optimistic outlook with a median target of 390p for the share price, signifying a potential increase from current levels.
   • The ongoing trade war uncertainties and the inherent volatility in the aviation industry make it essential for investors to adopt a long-term perspective when considering IAG shares.

Overall, the current market conditions present a unique buying opportunity. The turbulence in the airline industry may persist, but for investors willing to weather the storm and hold on to their shares, the potential for deep value in IAG is evident. Despite the uncertainties, the second chance to invest in IAG may yield fruitful returns for patient investors seeking long-term growth.