IAG upgraded to 'buy' by HSBC

9th Jun 2015 15:09

HSBC upgraded International Consolidated Airlines Group to 'buy' from 'hold', pointing to the recent weak share price performance.It noted that the stock has fallen 14% in the last two months, both in absolute terms and relative to the FTSE 100.Investor concerns have grown about the sustainability of Atlantic profits, as IAG reported less vibrant trading in April and May and Delta reported weak Atlantic loads and warned on US business travel, said HSBC."Though we expect Q2 2015 trading to improve year-on-year less brightly than Q1 2015, we continue to expect strong peak summer trading for Q3 2015," it said.It said that Iberia's South Atlantic network is less exposed to Brazil than other carriers who are reporting soft trading. "Iberia's strong cost position and recovering brand should bolster profitability, which will also benefit from the strength of the Spanish economy," remarked the bank."Whilst trading momentum will dominate the investment debate, we will watch for further progress on the Aer Lingus deal. We expect Ryanair to accept IAG's offer and the key factor we watch for is the competition policy assessment."HSBC has a 630p price target on the stock.At 15:15, IAG shares were up 0.6% at 523.50p.