Goodbody upgrades BA owner IAG ahead of Q3 results

Goodbody downgraded its rating on IAG to hold on 8 September, given concerns that rising Covid-19 infection rates across the world were not being reflected in share prices.

Since then, however, IAG’s stock has fallen 25% - excluding the rights dilution - leaving the share price at a small discount to Goodbody’s assessed network risk. "As such, we change our recommendation to a buy ahead of the Q3 release due on Friday, October 30th," it said.

Goodbody said that with large parts of the market under renewed government restrictions and with further capacity cuts announced there is little additional news that could shock the market further.

"As such, we believe that the sector is reaching the bottom in terms of the pricing-in the short-term risk of additional capacity cuts over the 2020/21 Winter season and that it is right to start pricing-in the recovery scenario expected to begin next Spring," it said.

As far as the Q3 results are concerned, it said the market will be looking for commentary on the group’s cash burn rate and balance sheet position.

"Normally, management do not give any balance sheet details at the third quarter but it is likely that the company will be looking to reassure investors at this time that the group has the cash resources to see it through to the expected recovery in demand next Spring."

Goodbody cut its price target on IAG to €1.30 from €2.25.