Investors in the European aviation group which owns British Airways had been hoping for some good news from Friday’s earnings release. However, the city was left disappointed by less than expected revenue and increasing debt.
Q2 total revenue EUR 1.24 Billion vs exp EUR 1.41 B
EPS -0.18c vs -0.27c
Despite reporting a narrower-than-expected EPS, traders sold the IAG share price on the revelation net debt had increased by 24% in the second quarter.
As a result, IAG is 24% below June’s 2021 high of 222.10p. Furthermore, the share price has reversed almost all of this year’s gains and is only marginally higher than January 4th’s 165.96p opening price.
But, considering the UK’s progress with its vaccination drive and the relaxation of travel restrictions, is the IAG share price starting to offer good value?
The daily chart shows IAG has traded in a bearish descending channel for the last 7 months.
Additionally, Friday’s decline has forced the share price below the 200-day moving average at 173.14p.
This negative price action should now target the lower end of the descending channel at 155.60p, around 7.5% below Friday’s close.
Considering the downside momentum, this looks like a probable destination for the price. However, the 19th of July low at 156.80p reinforces this support level.
The bearish outlook is valid as long as the IAG share price remains below the 200 DMA. However, if the price recovers the long term indicator, it should advance to the 100-day average at 186.86p.
IAG price chart (daily)
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