IAG Shares (LON: IAG) Breaking Out Of Range? Here’s Why Analysts Like The Stock

International Consolidated Airlines Group Shares (IAG) have experienced a strong rally over the past month, outperforming the FTSE 100. As technical traders watch to see if the stock looks to find a new mark of ‘support' from a previous resistance level, we take a look at the view from analysts.

The stock ranged throughout 2023, and even into 2024, but in March, it began to make its move higher. It is now up over 13% this year and more than 15% over the last month. With the resistance over the past couple of years looking pretty firm at 175GBX, IAG shares closing outside the range on 2 days out of the last 5 seems like a battleground area to watch.

There's been a feeling that IAG shares have been undervalued for a while; however, constant headwinds in the airline industry have continued to weigh on the stock. 

Significantly, a wave of recent analyst upgrades has acted as a catalyst for the stock's upward trajectory, providing a reassuring signal to investors. Here's why analysts see it rising:

The airline group was recently double-upgraded to Overweight from Underweight at JPMorgan with a new price target of EUR 2.50, up from EUR 1.45. The investment bank said IAG's reinvestment cycle should push long-term earnings growth and margin expansion.

Exane BNP Paribas also double-upgraded in March, lifting its rating for the stock to Outperform from Underperform with a 210p price target. Analysts at the firm said IAG “fixed” the bear thesis with leverage down and shareholder returns improving.

Analysts at RBC Capital raised IAG to Outperform from Sector Perform with a new price target of 220p, up from 200p in a recent note, saying that the company now generates the second highest margins in the group behind Ryanair. However, they feel that by some metrics it trades on the cheapest valuation among the airlines. In addition, RBC notes that airline capacity data now suggests the North Atlantic capacity looks set to be more of a tailwind than a headwind for IAG's British Airways and Aer Lingus airlines this summer.

Elsewhere, Raymond James analysts lifted IAG to Outperform from Market Perform with a EUR2.25 target, while Kepler Cheuvreux double-upgraded IAG to Buy from Reduce with a 222.12p price target.

With IAG dipping this morning in London a shade under 175GBX before pushing back out we will have to see whether this mark can represent a new level of support, or whether shares may revert back into the range for a period.