Swiss credit grants a potential appreciation of 67 percent to securities of IAG in pounds, the currency most chosen by experts to analyze the airline holding company, with an “overweight” recommendation and a 12-month target price of 224 pence.
The improvement comes after IAG’s earnings outlook was revised by experts at the Swiss bank.
Projections point to an EBIT for 2023 of 2.1 billion euros, from the 1.7 billion previously forecast.
The game would go further for the 2024-2025 period where it would grow by 23 percent and 37 percent respectively, to 3,100 million euros and 3,200 million.
Key moment for IAG
“IAG is at an important moment, with an increasingly consolidated market, and may demonstrate better margin performance as demand on transatlantic routes picks up significantly.
The calculated EBIT margin for the sector is 8 percent, while IAG could take it between 12 percent and 15 percent.
IAG routes keep reopening”and it’s time to get comfortable with IAG’s capabilities and competitive position”, comment the experts in the entity’s latest report on the European airline sector.
Despite this, Credit Suisse acknowledges that the timing of traffic and revenue recovery remains “very uncertain” on long-haul routes, but that IAG has the ability to recover 2019 flight levels in 2023.
Damage to ebit in 2022
Uncertainty causes high volatility when defining the gross profit margin. The bank’s experts point out that the lower the volatility, the greater the ability to overcome downward pressure on profits.
With this framework, they emphasize that IAG offers the lowest level of volatility, between 49 percent and 59 percent, if you look at the period from 2010 to 2019, the year before the outbreak of the coronavirus.
“On this basis, IAG’s track record inspires most confidence, followed by Air France-KLM, while the history of Lufthansa it inspires less”, they emphasize.
With everything, from Credit Suisse indicate that their profit forecasts for IAG in 2021 worsen and that the ebit losses would be 3,100 million euros from the 2,950 million of its previous estimate, given the appearance of omicron.
The situation would be repeated for the whole of 2022 since Credit Suisse calculates an annual EBIT of 296 million euros, from the previous 852 million, as they estimate that IAG will still record losses during the first half of the year.