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The International Consolidated Airlines (LSE: IAG) share price has been climbing. Despite a dip in early 2025, it’s up over 80% in the past 12 months — and close to 250% over five years.
And forecasts are still bullish. There’s a strong Buy rating on the stock with 11 analysts urging us to buy compared to just one Sell stance. The average price target of 438p is a welcome 14% ahead at the time of writing.
Rosy outlook
Even the lone negative outlook has a price target of 350p. And that’s only 9% below the latest price. For an airline, I’d expect normal sector volatility to shift share prices by more than that in either direction fairly regularly. Just oil price fluctuations can be enough.
The top end of the target range, at 590p, is a huge 54% ahead of today.
But if we take off the tinted spectacles, we can see a business that clearly faces some significant risks. I’ve already mentioned oil prices, and they’ve been on a downward trend for the past four years. But the fall has been boosted by the US drive to pump the stuff as fast as possible.
Longer-term investors should think about the probability that we really will have to get back to tackling climate change some day. And this spell of cheap oil might come to an end.
Global risk
The IAG share price is surely also at the mercy of geopolitical and economic factors. Transatlantic travel is under pressure as the US faces the double-whammy of stubborn inflation and a weakening jobs outlook. And a few parts of the world are no-go areas for other reasons.
Then there’s competition. Airlines have very little pricing power, competing almost entirely on price alone. For the great majority of flyers, all that counts is who can get them there for the least money.
IAG has never really been at the forefront of low-price travel. In the 40 or so years I’ve been taking flights, usually long haul, neither British Airways nor Iberia — IAG’s big two subsidiaries — have ever shown up as attractive price alternatives in my searches.
Too cheap?
Maybe I sound a bit negative towards airlines and towards IAG. I just think it’s important to understand the risks in a business like this.
Beneath it all, what counts is valuation. And with a forecast price-to-earnings (P/E) ratio of just 6.5, IAG suddenly looks attractive. That’s less than half the FTSE 100 long-term average. And with analysts predicting decent earnings growth in the next few years, it could drop as low as 5.8 by 2027.
The dividend is coming back too, but we should only expect a yield of around 2% this year. Yet it does suggest management confidence.
I can see a fair bit of risk already built into the low price, and even a bit of safety margin. Despite my concerns, I think this could be a good time for investors to consider buying IAG shares. The analysts might be right on this one.
