The IAG share price jumped to its highest point since January 2020, even after the company warned about capacity in its financial results. IAG jumped to a high of 393.1p and then pared back some of those gains to the current €383. It has jumped by over 85% from its lowest point this year.

IAG slashes capacity growth plan

IAG, the parent company of British Airways and Iberia, published strong financial results but warned about its capacity. Its second-quarter revenue rose by 8% in the year’s first half to €15.9 billion.

Most importantly, its operating profit jumped by 43.5% to €1.8 billion. Most of this profitability growth occurred in the second quarter, despite concerns about the global economy remaining.

Most importantly, IAG continued to return funds to investors. It paid them €1.5 billion through a combination of dividends and share buybacks. 

IAG ended the second quarter with €9,34 billion in cash and cash equivalents, down from €9.828 billion in the same period last year. Its borrowings improved to €14.87 billion, down from €17.3 billion.

The most important aspect of its report was that the company slashed its projection for capacity growth this year, citing engine reliability and air traffic capacity issues. EasyJet, another European airline, cited the latter issue when it published weak financial results.

Read more: Here’s why the IAG share price is firing on all cylinders

The company has experienced engine reliability issues with its Boeing 787 Dreamliner planes. This issue has forced its planes to remain on the ground for longer for maintenance, affecting its performance. 

IAG believes its business will continue to perform well this year, thanks to robust demand in its core markets in the North Atlantic, Latin America, and Europe. It also noted that demand for its premium seats. The CEO said:

“We continue to benefit from the trend of a structural shift in consumer spending towards travel. We remain focused on our market-leading brands and core geographies, where we continue to see robust performance, allowing us to invest in fleet as well as technology to improve operational efficiency and customer experience.

Another positive for the IAG share price is that there are signs that it is a bit undervalued. It has a forward price-to-earnings ratio of 8, much lower than the industry average of 20.50. The multiple is also lower than that of other top airline companies like Delta and United.

IAG share price analysis

IAG stock price chart | Source: TradingView

The daily chart shows that the IAG stock price surged to a high of 393p on Friday and then pulled back to 376p as investors reacted to its earnings. 

It remains above the important support level at 361p, its highest point on February 7 this year. That was an important level as it was the neckline of the inverse head-and-shoulders pattern, a common bullish continuation pattern. sign. 

IAG stock price has remained above the 50-day and 100-day Exponential Moving Averages (EMA), a sign that bulls are in control. Therefore, the stock will likely continue rising as bulls target the psychological point at 400p. A drop below the support at 361p will invalidate the bullish view.

Read more: British Airways parent inks $13bn Boeing deal after US-UK trade breakthrough: why it matters

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