IAG’s share price fell hard in this month. It erased most of its gains from last year when the company was among the top performers of the FTSE 100. In the past three days it has fallen to the lowest price since November of last year, 210p. Over 40% of its value has been lost since the peak reached in this year.
The IAG shares are crashing
IAG’s stock has fallen due to the trade war that is raging between US and European nations.
IAG’s trade volume between Europe and America makes it more vulnerable to the current crisis.
This route is a major source of revenue for the company’s leading brands, such as British Airways and Iberia. The ongoing trade conflict could hurt the transatlantic route. This is especially true when business travelers are involved.
As the trade conflict escalates, analysts expect that many companies will start to cut costs within the next couple of weeks. This is because Trump imposed a tariff of 10% on UK goods and a 20% one for all other EU products. Analysts at TD Cowen wrote:
We expect slower growth and higher inflation in a world with a less isolationist US, which will significantly affect the airline industry’s competitiveness and cause the multi-nationals to be pushed back.
These fears are they justified?
Theoretically, this fear is justified because tariffs are likely to have an impact on all industries. Tariffs also increase the costs of business over time, as businesses will have to change their prices.
There is some evidence that the fears are exaggerated for many reasons. IAG may be able to benefit from the falling crude oil price. Brent, Brent’s international benchmark has fallen to $63 while West Texas Intermediate has moved up to $59.55.
Low oil prices will benefit airlines, as they can lower their costs of business. Jet fuel is the main input.
The airlines had been through worse times before. After the 9/11 attack, for example, demand dropped dramatically. All of these firms suffered when they had to park their aircraft during the recent pandemic.
IAG is also doing very well as the recent annual results show. Data showed the company had made more than EUR32 billion by 2024. This is a 9 percent increase on a previous year.
The company’s profits jumped by 2.9% to EUR 2,7 billion. This year, the company achieved strong results as it reduced debt. IAG continued to distribute dividends to shareholders.
IAG Share Price Analysis
Source: TradingView
As the daily chart shows, the ETH has dropped in price over the last few days due to concerns regarding the transatlantic route. The decline in IAG shares is consistent with the previous forecast. Today, it has fallen from 370p down to 218p as the stock fell below all moving averages.
All three indicators, the Relative Strength Index(RSI), the Stochastic oscillator and the Stochastic Indicator are now at oversold levels.
In the short term, IAG’s strong fundamentals make it a good stock to buy. It may then bounce back up to 276p, the 200-day average.
The post This is why IAG’s share price fell, and how a recovery could be epic can be updated as new information becomes available
