Can the IAG share price outperform the FTSE 100 in 2022?

The IAG share price has been one of the worst performers in the FTSE 100 in the past couple of years. Is this all about to change in 2022?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Since the pandemic started in 2020, the IAG (LSE: IAG) share price has faced an extremely turbulent time. Indeed, it fell from over 600p pre-pandemic to under 100p at one point during the global health crisis. It’s currently priced at around 140p. By contrast, the FTSE 100 has almost reached its pre-pandemic levels. But with travel restarting around the world, and Covid restrictions being removed, can the IAG share price outperform the FTSE 100 this year?

Recent results

IAG’s 2021 results were far from pretty. In fact, it reported an operating loss of around €2.7bn. At the same time, net debt increased another 20% from the prior year to reach €11.6bn. This means that if losses continue, it could lead to major trouble for the airline group. The IAG share price could lose more ground as a result.

But there are also some positive signs. For one, revenues increased 8.3% from 2020 to reach €8.45bn, demonstrating that demand started to return. In addition, operating losses have shrunk compared to the previous year, showing the benefits of the firm’s cost-cutting measures.

Should you invest £1,000 in Amigo Holdings Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Amigo Holdings Plc made the list?

See the 6 stocks

Finally, there’s also more optimism around the future. For one, current passenger capacity plans for 2022 are around 85% of 2019 capacity for the full year. The Omicron variant is also said to have had a minimal impact on bookings for Easter and summer. As people have been unable to go on holiday for a long time, I feel that there’s a possibility for demand to exceed the 85% figure, especially if there are no more large coronavirus outbreaks.

Not out of the woods yet

Yet there are still some worries around the pandemic. In fact, due to the waning immunity offered by vaccines, cases do remain high, especially in Asia. As such, there’s the worry that, even if all restrictions are lifted, some people will still be reluctant to travel. This would have a negative effect on the IAG share price.

And due to the extremely high price of oil, costs could soar. The company has not fully hedged oil and this is likely to strain profit margins. Even so, due to the current turbulent nature of oil, I hope that this is only a short-term problem.

Finally, the conflict in Ukraine has meant that UK carriers can’t fly over Russian airspace.  Although IAG has stated that this will only have a “minimal” impact on operations, it remains a concern, especially if the company has to start taking longer routes to avoid Russian airspace. 

Can the IAG share price beat the FTSE 100?

It seems certain that the IAG share price will be more volatile than many others in the FTSE 100, as the airline industry remains turbulent. But while this is a major negative, I think the cloud may have a silver lining, especially if demand increases for travel this summer. This could help boost investor sentiment. Therefore, although I recognise that there are many risks, I’m tempted to initiate a small position in IAG, as I feel it could outperform the FTSE 100 in 2022.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Stuart Blair 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.

More on Investing Articles

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »

Investing Articles

How much would Tesla stock be worth if it was valued like Nvidia?

The market seems to view Tesla as a tech stock rather than a car manufacturer. What could this mean for…

Read more »

Investing Articles

This ex-penny stock skyrocketed 900% in 2020! Is it about to surge again?

This subdued hydrogen penny stock was hot in 2020, but with demand for green hydrogen rising in Europe, can the…

Read more »