International Consolidated Airlines Group Share Price Forecast August 2021 – Time to Buy IAG?
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Shares of Anglo-Spanish multinational airline holding company International Consolidated Airlines Group (LSE: IAG) are in the red today after closing at £165.64 on August 13th (19:43 UTC+1). While IAG is up by 17.7% over a one year period, the shares are actually down by 44% compared to two years ago. The pandemic has certainly impacted these shares. However, many investors believe that the shares could rally over the next months.
International Consolidated Airlines Group – Technical Analysis
According to its financial statement, its market cap is £8.217 billion with total assets worth £28.725 billion. Revenue for 2020 was at £6.99 billion with a profit margin of -87.99%, compared to revenue of £22.38 billion in 2019.
Moving averages for International Consolidated Airlines Group such as Exponential Moving Average (100)(181.93), Simple Moving Average (100)(191.06), Exponential Moving Average (200)(181.49) and Simple Moving Average (200)(176.63) are pointing towards a selling action. Oscillators such as Stochastic RSI Fast (3, 3, 14, 14)(12.13), Williams Percent Range (14)(−98.09), Bull Bear Power(−6.10)and Ultimate Oscillator (7, 14, 28)(35.90) are all neutral.
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Recent Developments
International Consolidated Airlines Group announced its financial results for 2021 for the period ending on June 30th. Cash earnings for the period came in at $747 million, a 170% jump compared to last year. Insurance profits for IAG came in at$1,007 million, a 35.9% increase. Other highlights from the results included a 100% dividend increase to reach 20 cents per share as well as a 3.8% growth rate for Gross Written Premium (GWP). The financial results did deliver some positives such as an improved insurance margin of 13.5%, despite delivering a loss of $427 million net loss.
The government of the United Kingdom has simplified the process of entering the country by addressing some initial issues that were present in recent weeks. Several key travel routes have been opened up again, including to countries like France. With the percentage of vaccinated individuals rising in the U.K, the prospects for international travel is high, which in turn will positively impact IAG’s price. The government should continue aiding this sector to achieve higher flying hours as short-haul flights to Europe is a key market during summer.
Should You Buy IAG Shares?
Investors can consider two main reasons for investing in IAG – the diversification around the company and better liquidity. IAG’s shares have better liquidity as evident from its Q2 results that the company released at the end of July. It had liquidity of €10.2 billion into the 2nd half of the financial year as a result of drawing on facilities from sources such as UK Export Finance and the issuance of new bonds. This meant that the company had recorded cash worth €7.7 billion at the end of the first half of the financial year which is an increase of €1.7 billion from the end of last year. This provides investors with the confidence that the company can survive through a difficult second half. However, there is a risk that the company will accumulate a higher debt pile which will make interest repayments difficult. Further bond issuance might be needed if the company doesn’t see demand in the next 12 months.
IAG’s share price could also increase as a result of the diversification around the company. Different airlines which operate in different markets can offset each other. For instance, IAG shares can still grow even with the likes of British Airways struggling, thanks to the other airlines in the group. However, there is also a risk that British Airways can drag the overall sector down. Investors should thus, hold off for few weeks before picking up IAG shares as they should see how the summer pans out for the company.
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