IAG (LON: IAG) has price recovery has stalled in the past few days as concerns about the ongoing recession in the UK. The stock was trading at 133.70p on Tuesday, which was much higher than the year-to-date low of 91.08p.
Why British Airways parent could soar
IAG is a leading player in the transport and tourism services internationally. It is an aviation holding company that owns leading brands like British Airways, Iberia, and Aer Lingus among others.
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There are several reasons why the IAG share price will likely continue rising in the coming months. First, jet fuel prices will likely retreat in the next few months, which is important since fuel is the firm’s biggest cost. Brent and West Texas Intermediate prices have dropped to the lowest level this year.
Second, demand will likely recover at a faster pace than what was expected. The most recent results showed that the company’s total passenger revenue rose to £14 billion in the first nine months of the year. It had just £3.1 billion in the same period in 2020, as we wrote here.
Its total revenue increased from £4.9 billion in 2019 to over £16.68 billion while its profit after tax rose to £199 million. Therefore, the company’s revenue will be higher in the coming months as the industry recovers.
A key catalyst for this recovery will be the Chinese market, which is yet to recover because of the government’s quarantine rules. After several protests, it seems like the government is working to reopen. The stock will likely rise if the country reopens in 2023.
Third, business travel will recover at a faster pace than expected. Studies estimate that business travel will move to its pre-pandemic levels in 2026. I suspect that this recovery will happen earlier. This is important since British Airways is one of the biggest players in business travel.
IAG share price forecast
The daily chart shows that the IAG stock price has been in a bullish trend in the past few weeks. In this period, it has managed to move above the 25-day and 50-day moving averages. It has also stalled at the upper side of the descending channel pattern that is shown in orange while the Relative Strength Index (RSI) has moved below the overbought level.
Therefore, the stock will likely have a bullish breakout in 2023. If this happns, the next key resistance level to watch will be at 180p. A drop below the key support at 120p will invalidate the bullish view.
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