IAG: Share price of British Airways owner ‘significantly undervalued’
IAG’s share price has been dubbed “significantly undervalued” by analysts as flight numbers soar and the airline group shrugs off wider political and economic headwinds.
British Airways’ parent company reported quarterly operating profit well-ahead of expectations last Friday as it unveiled an order for 53 new Airbus and Boeing aircraft.
The bumper results came despite wider concerns that geopolitical turmoil and erratic policy developments in the US would impact the bottom line.
Transatlantic travel, British Airways’ bread and butter, has been hit by fears of a more hostile border under US President Donald Trump.
There is also an ongoing dispute between airlines and airplane manufacturers over who should front the costs of the US president’s tariffs.
Analysts at Peel Hunt described last week’s results as “knockout” and reaffirmed a Buy rating for IAG’s stock at a target price of 420p.
They noted any softness in US point-of-sale economy demand had been offset by the firm’s premium cabins.
Investors will also be relieved that March’s power outage at Heathrow Airport, British Airways primary hub, also had little impact on revenue.
Shares in British Airways owner IAG are currently changing hands for around 311p each – a rise of almost five per cent so far today.
The group ended last week with a market capitalisation of just over £14bn.
British Airways’ owner set for brighter outlook?
The outlook for IAG may have been even brighter, but it is impossible to guarantee that ongoing macroeconomic and geopolitical uncertainty would not cause problems down the line, Peel Hunt analysts wrote in a note on Monday.
They added: “With upgrade potential, a low rating, and ongoing buybacks, there is a lot to like at IAG, especially its high-growth, asset-light businesses.”
Shares in the owner of British Airways is up nearly 70 per cent over the last 12 months.
Heathrow Airport on Monday reported its busiest ever April in a big sign of travel demand’s resistance to any fall in business confidence created by Trump’s tariffs.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Air travel appears to have been immune to the trade turmoil unleashed by Trump on Liberation Day, and the sharp falls in stock markets.”
“Even though it appeared to lead to a fresh crisis of confidence among businesses, it’s done little to dent demand for trips away.”