One year ago, the FTSE 100 airlines stock International Consolidated Airlines Group (LSE: IAG) was trading at sub-100p levels. Because of the pandemic’s effects, the stock had seen a steep fall and was reduced to penny stock status. Cut to one year later, and the IAG share price has risen by some 80% to 160p+ levels.
So, did I miss out by not buying IAG stock then? Yes, I did indeed. If I had bought IAG as penny shares, I would be sitting on some sweet returns right now.
IAG share price’s fluctuations
However, we at the Motley Fool are interested in long-term stock market investments. And as far as the fate of the IAG share price over the next few years is concerned, the verdict is still out. This is particularly so because a substantial chunk of the gains it made during the months following the development of Covid vaccines have been lost.
Like many other Covid-19 impacted stocks, IAG also ran up in the relief rally that started last November. By early April this year, its share price was sitting pretty at highs of 218p. But continued uncertainty has taken its toll. As I write, it is trading at close to 163p, a drop of 25% from its highs earlier in the year.
The question I now need to consider is whether there is still upside to the IAG share price. Or whether as a long-term investor I dodged a metaphorical bullet by missing out on it when it was still a penny stock.
The problems for the company
There is no denying that IAG has a bunch of problems to deal with. Travel is still limited and coronavirus cases are even rising in some parts of Asia, which does not bode well. Oil prices are elevated and expected to remain so into next year. As a crucial cost in the aviation business, this could put additional pressure on the company’s financials. In fact, IAG even flagged this as a concern a few months ago. And the company also has a mountain of debt to contend with.
Upside for the FTSE 100 stock
But stock prices rise in anticipation of better times, as we saw last November. FTSE 100 companies’ performance had not improved overnight. In fact many of them reported losses in recent months. Yet, they were running up fast. And that makes me optimistic about IAG too.
The global economy is expected to show good growth for the rest of this year and the next. Vaccines have made protection against the virus effective, reducing the possibility of it again wreaking the kind of havoc it did last year. So better times could start showing up in IAG’s numbers soon — in fact they already have.
What I’d do
As this trend gets reinforced, I reckon that the IAG share price could see even better times. It may take a while for it to go back to its pre-pandemic highs. But I believe that there is a good chance it will. That is why I have already bought it.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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