The International Consolidated Airline (IAG) share price has gone parabolic and is cruising after the company published strong financial results on Friday. It climbed by over 7% last week, reaching a high of 235p, its highest level since March 2020. It has jumped by over 158% from its lowest level in 2022.
Could the IAG share price hit 450p?
IAG stock price has done well in the past few months, helped by the recovery of the civil aviation industry.
There are signs that the bullish trend will continue in the coming months. On the weekly chart, we see that the stock has formed an inverse head and shoulders chart pattern, a popular bullish sign in the market.
The stock has also formed a golden cross pattern as the 200-week and 50-week Exponential Moving Averages (EMA) have made a bullish crossover.
Additionally, IAG share price has moved above the 38.2% Fibonacci Retracement level, a sign that the bullish momentum is continuing.
The Average Directional Index (ADX) has moved to 29, a sign that the bullish trend is gaining momentum. Additionally, the Relative Strength Index (RSI) has jumped to the overbought level of 74, which is another sign that the trend is continuing.
Therefore, the IAG stock price will likely continue rising as bulls target the 50% Fibonacci Retracement point at 225p. A break above that level will point to another increase to the 61.8% retracement level at 310p. While more gains are possible, we believe that it will take more time to get to the 2020 high of 450p.
The bullish outlook for the stock will become invalid if the IAG share price drops below the psychological level at 200p.
IAG chart by TradingView
Read more: IAG share price is about to form a very rare bullish pattern
International Consolidated Airline earnings
The most recent catalyst for the IAG share price was its financial results, which came out on Friday.
In its report, the company said that its revenue jumped by 7.9% in the third quarter, reaching €9.3 billion. Its nine-month revenue surged to €24 billion, while its operating profit soared to €3.3 billion.
As a result, its quarterly and nine-month profit after tax jumped to €1.4 billion and €2.3 billion, respectively. These results were better than expected and came at a time when the aviation industry is going through major headwinds.
One of the top headwinds has been the falling airfare prices as competition heats up and as growth momentum fades. There are signs that the revenge travel craze that happened a few years ago has started to fade.
IAG also has boosted its balance sheet. While its borrowings have remained steady at €16 billion, its cash and interest-bearing deposits rose from €6.8 billion to €9.8 billion.
This improvement has helped the company to boost its share buybacks and dividends. It announced a €350 million share buyback, which it hopes it will increase the earnings per share.
IAG’s business has done well because of its diversified business model. In addition to British Airways, IAG also owns other well-known brands like LEVEL, Aer Lingus, Iberia, and Vueling.
LEVEL, which mostly connects customers between Spain and the United States, had most of the growth in the first nine months of the year. Iberia grew by 15.5%, while British Airways grew by 4.6%.
Most notably, IAG is still a highly undervalued company. It has a forward price-to-earnings ratio of 6, which is much higher than other airlines. For example, Delta Air Lines has a forward multiple of 10.16, while United Airlines and American Airlines have multiples of 9.40 and 19.7, respectively.
This cheap valuation is happening even as the forward revenue growth remains substantially strong. It has a forward revenue growth metric of 12.90%, while Delta, United, and American have metrics that are less than 8%.
Therefore, there is a likelihood that the IAG share price will continue rising as it seeks to bridge the gap with its American peers.
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