Here are the latest price targets for IAG

The International consolidated aviation group (LSE:IAG) stock price has soared in 2024. With an increase of more than 37%, it is one of the FTSE 100‘s best performing stocks.

However, investors may feel like they’ve been here before, and things can quickly come undone in the future aviation industry. So the big question is: what does the future look like?

Analyst estimates

It’s fair to say that Analysts are somewhat divided about this, but the general picture is positive. As far as I can tell, the average price target is about 18% higher than current levels.

The most optimistic estimate is £4.50 – more than double current levels. That comes from Liberum, who thinks the market is forgetting how well the company was doing before Covid-19.

On the other hand, HSBC Analysts have a price target of £1.70, which is 20% lower than where the stock currently stands. That is from July, where Liberum estimated in April.

There’s not much consensus here, which means investors really need to think for themselves about what the prospects for the company look like. But that’s something I’d like to do anyway.

Income

In the long term, the IAG share price will depend on how much money the company makes. And I think the earnings outlook for the company is interesting.

On balance, analysts have a fairly positive outlook for the company’s earnings. Earnings per share are expected to rise steadily, reaching 54p by 2027.

At the risk of sounding a bit unhappy, I’m skeptical. IAG’s earnings have been choppy over the past two decades, with some relatively quiet periods punctuated by sharp declines.

IAG earnings per share 2005-2024

Created at TradingView

I’m not saying investors should expect another pandemic, a financial crisis or an Icelandic ash cloud. But these things can pop up unexpectedly and wreak havoc on airline profits.

Competition

The problem with these exogenous events is that airlines have high fixed costs. In other words, they still have to pay for fuel, staff and airport fees regardless of whether they generate passenger revenue or not.

However, I have another concern about IAG, and that is competition. Until recently, long-haul flights were largely immune to the threat of budget airlines, but that is changing.

Wizz has announced its intention to offer low-cost air travel connecting Europe and the Middle East. I have major concerns about this for the company, but for IAG I don’t like it.

Whether or not Wizz finds a way to make money on these routes, the increased competition can only be bad for IAG. Especially if that competition undermines them in terms of prices.

Not for me

Liberum’s point is well made: I agree that the pre-pandemic years were good years for IAG. But that’s not enough to convince me that the stock is a buy at current prices.

The reason is that I strongly dislike the company’s business model. Although high fixed costs ensure rapid growth when all goes well, they also make them vulnerable in times of recession.

I’m looking for shares of companies that are a bit more resilient and can hold up better when the unexpected happens. While there is one airline I find attractive, it’s not IAG.