Is IAG worth 193p a share?

British Airways owner International Consolidated Airlines Group (IAG) could see its share price fall to new lows after reporting a €4 billion loss amid mounting fears of a second wave of Covid-19 cases in Europe that could see governments reinstate lockdowns and damage the aviation industry further.

‘All IAG airlines made substantial losses,’ IAG CEO Willie Walsh said in a statement.

‘Each airline has taken actions to adjust their business and reduce their cost base to reflect forecast demand in their markets not just to get through this crisis but to ensure they remain competitive in a structurally changed industry,’ he added.

As a result of government travel restrictions, second quarter (Q2) passenger traffic fell by 98.4%, with the airline group expecting flight demand will not return to pre-crisis levels until 2023.

IAG continues to take action to strengthen its balance sheet and liquidity position including more than halving its operating cash costs and significantly reducing its capital spending. At the end of June liquidity stood at €8.1 billion.

Based on its current capacity planning scenario, IAG would reach breakeven in terms of net cash flows from operating activities during Q4 2020.

Given the uncertainty generated by the coronavirus pandemic, IAG is not providing profit guidance for 2020.

IAG closed at 193p on Wednesday, with the stock already down 70% year-to-date and likely to fall even further in the coming months.

Shareholders vote on €2.75bn capital hike in September AGM

Subject to shareholder approval at its annual general meeting (AGM) on 8 September, IAG will undertake a capital increase of up to €2.75 billion.

The British Airways owner will likely see its stock price diluted and its shares fall in value if shareholders approve the rights issue later in an effort to shore up its balance sheet.

‘Qatar Airways, has already committed to support the proposed capital raising,’ IAG said in a statement. ‘

This will best position IAG to continue executing its strategic objectives and capitalise on its existing market leading position and future growth and consolidation opportunities,’ the company added.

IAG: technical analysis

Shares in IAG have been on the slide over the past two-months, with the stock approaching the lows seen back in May, according to Josh Mahony, senior market analyst at IG.

‘As things stand we appear to be finding some support on the March low of 179p, yet further downside could yet be around the corner as news flow continues to depress the price,’ he said.

‘There is a possibility that we are looking at a retracement of the 148p rally, yet with price having cleared out all the Fibonacci levels, the chances of another multi-year low are growing, Mahoney added.

‘As such, any bullish outlook would require a break through the prior swing-high (currently 233p). Until then, further downside looks likely as we close in on the prior low of 148p.’

How to trade stocks with IG

Looking to trade the IAG and other stocks? Open a live or demo account with IG and buy (long) or sell (short) shares using derivatives like CFDs in a few easy steps:

1. Create an IG trading account or log in to your existing account
2. Enter ‘International Consolidated Airlines Group’ in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade