IAG shares up on Deutsche Bank upgrade to 'buy', bullish outlook
Investing.com -- Shares of International Airlines Group (LON:ICAG ) rose more than 2% on Wednesday after Deutsche Bank (ETR:DBKGn ) Research upgraded the stock to "buy."
The upgrade reflects the analysts' positive outlook for IAG, driven by several factors they believe will support continued margin recovery and profitability.
The analysts at Deutsche Bank flagged IAG’s strong position in the transatlantic market, where supply constraints are expected to remain a key driver of pricing power.
As international air traffic, particularly on the North Atlantic routes, remains tight, IAG’s British Airways unit is well-placed to benefit.
This is further supported by the airline's ongoing £7 billion transformation program, which is expected to help boost margins and streamline operations over the coming years.
Deutsche Bank also pointed to IAG's impressive financial trajectory, forecasting a positive outlook for free cash flow generation and further de-leveraging.
This would provide the company with more room for potential returns to shareholders as well as opportunities for mergers and acquisitions.
Analysts noted that, despite these positive factors, IAG shares are currently undervalued, trading at a price-to-earnings ratio of around 5x for 2025 estimates, well below its historical average of 7x.
The airline sector as a whole is facing various challenges in 2025, with an anticipated growth in short-haul supply expected to be roughly in line with demand.
However, analysts believe the pricing power in long-haul routes, particularly transatlantic flights, will remain strong due to supply limitations and IAG's dominant position in the market.
Deutsche Bank is optimistic about IAG's potential to outperform its peers and the broader market.
As a result of the upgrade, Deutsche Bank Research has set a target price of 400p for IAG, indicating further potential upside based on their positive outlook for the company in the medium term.
Source: Investing.com
