Airline operator International Airlines Group (LSE:IAG) has had a tough couple of years since the pandemic started. With international travel demand now rising again, is the current IAG share price a good opportunity?
IAG share price currently
As a quick reminder, IAG is an Anglo-Spanish multinational airline holding company. Some of its best known brands include British Airways, Aer Lingus, Iberia, and Vueling.
Many aviation stocks have been hit hard since the pandemic began as planes were grounded. IAG was no different and the shares have been trading close to penny stock levels for some time.
So what’s the current state of play with the IAG share price? Well, as I write, the shares are currently trading for 124p. At this time last year, the shares were trading for 194p, which is a 36% drop over a 12-month period.
It is worth noting IAG shares have not returned anywhere near pre-pandemic levels before the stock market crash in March 2020. On 15 February 2020, the shares were trading for 426p, which means shares are currently trading for 70% less then at that point.
For and against investing
FOR: IAG is a large diverse business with multiple operations across many territories. It owns British Airways, one of the largest airlines in the world, which covers the lucrative transatlantic routes. On the other hand, it owns budget brands, such as Iberia, which carry passengers to holiday hotspots within Europe. These diverse operations could see it benefit from a surge in post-pandemic travel now Covid restrictions seem to be a thing of the past.
AGAINST: Current macroeconomic headwinds and inflationary pressures are causing issues for IAG, as wwell as other airlines. Fuel prices are at all time highs and consumer spending has been impacted too meaning bookings could slow down. This could have a negative impact on performance and returns, and I believe this is keeping the IAG share price from rising.
FOR: A price-to-sales ratio can offer insight into the value of a stock. A general rule of thumb is that the lower the price-to-sales ratio, the better value for money a stock may be. IAG’s current ratio is 0.7. On that basis, the shares do look decent value for money at current levels.
AGAINST: Competition in the airline industry has only intensified since the pandemic began. Both the transatlantic long-haul and budget markets are inundated with airlines and businesses trying to bounce back from pandemic woes. This competition could have an impact on performance as well as the IAG share price in the coming months.
What I’m doing now
I understand that IAG could continue to experience issues in the short to medium term due to macroeconomic issues. In addition to this, there has been a major shortfall in staffing levels at airports and airlines due to redundancies that occurred at the height of the pandemic. Recruitment to cope with rising demand has been slow.
I invest for the long term and I can see the IAG share price rising once more in the future. I wouldn’t add the shares to my holdings at the moment, however. The negatives currently outweigh the positives for me. I believe there are better stocks out there that offer better returns and more stability.