The IAG share price has fallen by 60%. Here’s what I’d do

first_img I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Dividend (€c)60.1123.4920.2517.96 “This Stock Could Be Like Buying Amazon in 1997” Anna Sokolidou | Monday, 1st June, 2020 | More on: IAG Simply click below to discover how you can take advantage of this. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. See all posts by Anna Sokolidou Net Debt (€m)7,5716,4306552,087 The International Consolidated Airlines (LSE:IAG) share price has fallen by 60%. This has been largely due to the coronavirus pandemic. Is it now a bargain or a value trap?Stock price and financials5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…As can be seen from the graph, IAG’s shares have plunged by 60% from their February highs. We all know that it has been due to the coronavirus pandemic and lockdown, which has led to a record fall in the number of flights. However, let us look at the company’s financial figures. EPS (€c)116.8117.7102.290.2center_img Year2019201820172016 Image source: Getty Images. The IAG share price has fallen by 60%. Here’s what I’d do Anna Sokolidou 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. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Revenue (€m)25,50624,25822,97222,567 Enter Your Email Address Source: IAGAs can be seen from the table above, the company’s revenue kept increasing between 2017 and 2019. The earnings per share (EPS) were quite stable as well. In 2019, IAG’s shareholders even received a special dividend, and dividends were well covered by earnings. In spite of the company’s profitability, its debt load increased. IAG’s net debt (total liabilities – cash) rose dramatically between 2017 and 2019. The stock is trading at record low levels now. But the share price reflects the airline’s current state of affairs. According to the company’s report for the three months to 31 March, sales revenue plunged by 13.4% compared to the same period in 2019. Even though the pandemic didn’t have that much time to affect the operations of the airline, the IAG ended the first quarter of 2020 with a loss of €1.68bn as opposed to a profit of €70m for the same period a year ago.However, the worst is yet to come since the company reduced its passenger capacity by 94%. It means that demand for flights would probably fall by this amount.Finally, although the current dividend yield of more than 5% looks attractive, it is not sustainable. So, overall, it is obvious that the airline is struggling. IAG’s futureThat’s why the company’s credit rating was downgraded by Moody’s. Instead of Baa3, it is now Ba1 – a junk credit rating. At short, Moody’s doesn’t believe in the industry’s near-term future. The reason being, the agency expects the airline industry to only recover 2019 passenger volumes in 2023 at the earliest.According to Moody’s, IAG’s liquidity will be under pressure. As my colleague Paul Summers pointed out, the airline still has to pay its fixed costs, including interest. Doing so is quite tricky while it doesn’t get any sales revenue. However, IAG’s liquidity cushion of about €10bn does inspire some hope and would allow the company to exist for some time. Still, IAG will probably be forced to borrow substantial sums of money until the situation for the industry gets substantially better. This, in turn, will make the company more of a risk in the short term.The reason why Moody’s did not cut the airline’s credit rating further is because of its size and reputation. So, as soon as the situation for the industry improves, the company will probably be the first to benefit from it. This is what I’d doEven though I like being a bargain hunter, buying IAG’s shares now is, in my view, too much of a risk. I think it will take the airline industry too much time to recover. So, I’d prefer to invest in more stable and profitable companies. Our 6 ‘Best Buys Now’ Shareslast_img read more