As the economy begins to recover from the pandemic, some sectors are recovering faster than others.
The aviation industry is still in the doldrums, and the IAG (LSE: IAG) share price reflects this. Indeed, over the past 12 months, the stock has produced a total return of just 14% compared to the FTSE 100‘s total return of around 23%.
But there are some signs the industry’s recovery is beginning to gain traction, and I think this could help push shares in IAG higher over the next few weeks.
I should start by saying that despite the fact green shoots of growth are appearing, activity in the aviation industry is expected to remain depressed until 2023, at the earliest. So I don’t expect the IAG share price to spring into life suddenly.
However, the owner of British Airways has said it will operate at about 45% of passenger capacity between July and September. That’s compared with pre-pandemic levels. Depending on travel restrictions, capacity could increase to 75% by the end of 2021.
At this point, I can’t tell if IAG will hit these operating targets by the end of the year. Nevertheless, management should publish more information on its plans over the next few weeks.
I also believe the company will issue another trading update over the next few weeks because many of its 37,000 staff are still on furlough.
When the furlough scheme ends at the end of September, these staff will have to return, and the group has said this will mean costs will “steeply increase.”
I’m expecting management to update the market before the end of this month. It’ll need to inform investors just how this additional spending will impact the group’s balance sheet.
This update may also contain more information on the company’s recovery plans. If they’re positive, the IAG share price should react favourably.
IAG share price risks
Having said all of the above, the company still may not update the market in September. But if it does, it may fail to show an improved performance.
Both of these are risks I need to consider. If the group keeps the market guessing, the stock could continue to languish, and investor sentiment may deteriorate further.
All in all, I think the IAG share price could push higher in September if the company provides positive news. If it doesn’t, investors may continue to avoid the stock.
Considering this uncertainty, I wouldn’t buy the shares for my portfolio at the moment. I’d rather wait until the group’s provided additional information on its recovery.
When this information’s available, it’ll be easier for me to determine how much the stock could really be worth. In the meantime, I’m happy to sit on the sidelines and watch IAG’s recovery take shape.
The post Will the IAG share price finally start to move in September? appeared first on The Motley Fool UK.
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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.