Analysts are bullish on the IAG share price: is it a good buy?

IAG (LON: IAG) share price has lost momentum recently even as the company’s business booms. The stock, which peaked at 173.35p earlier this month, has dropped to about 160p. It remains about 26% above the lowest level this year.

Aviation demand is rising

IAG, the parent company of British Airways and Aer Lingus, is doing great as demand for local and international flying jumped. This view was supported by the recent revenue growth by some of the biggest airlines in the world.

For example, on Thursday, Australia’s Qantas recorded a $1.1 billion profit for the first half of the year. Air New Zealand also published strong revenue and profits during the quarter.

In its financial results in July, IAG said that itrs half-year operating profit soared to 1.3 billion euro or 1.1 billion pounds. This was a strong comeback from a loss of 383 million pounds it made in the same period a year ago.

IAG has been supported by its diversified business. While its British Airways brand is known for business travel, Aer Lingus and Vueling are well–known brands in the leisure market.

IAG has also moved to reduce its debt, boost its workforce, and expand its markets. The key challenge, however, is that workers in the sector have demanded higher wages. British Airways recently agreed to a 13% boost of its wages, which could have an impact on its earnings. Chaos in Heathrow have also impacted its business.

Fundamentally, IAG is a good investment, with analysts expecting more profits going forward. However, there is a sense in which this robust growth has already been priced in the current stock price.

Analysts at Deutsche Bank have a target of 165p while those at Bank of America expect the shares will surge to 240p. UBS, Barclays, and Goldman Sachs analysts have a target of 180p, 170p, and 165p, respectively.

IAG share price forecast

The IAG stock price has done well in the past few months. It bottomed at 90.38p on October 3 2022 to the current 162.85p. The shares remain above the ascending trendline that connects the lowest levels since December last year.

Recently, the stock has dropped below the important support at 167.10p, the highest point on June 15. Despite the pullback, the shares remain above the 50-day moving average. It is between the 50% and 61.8% retracement levels. 

Most importantly, IAG share price has formed a double-top pattern at 173.50. Therefore, the outlook for the stock is neutral at this point. More gains will only be confirmed if the shares move above the key resistance point at 173.50p. 

The stock will likely remain in the current range ahead of the company’s Q3 results on October 27th.