Last week, investor sentiment was firmly negative, and it’s tough to believe there will be a turnaround during this shortened week, given the lack of positives…
Soaring energy prices and inflation continues to dominate the headlines, and with rates set to continue to rise, the economic outlook is shaky at best.
And so, we have an overall negative view again this week. Here are the stocks we are watching:
International Consolidated Airlines Group (IAG)
- Every day seems to be bad news for airlines and for IAG shareholders, the last few years have been a nightmare.
- Despite international travel now back up and running, IAG shares have not recovered at all, even though demand has been strong, recently reporting its first profitable quarter since the start of the pandemic.
- We get a sense of current demand by looking at searches for London to NYC flights, an extremely profitable route for IAG’s British Airways carrier. As we can see, searches are essentially back at pre-pandemic levels.
- As mentioned before, IAG is a stock that, over the long-term, we like, however, headwinds such as inflation, fuel prices, and travel chaos as a result of staffing issues have hit the stock hard.
- In the near term, it is approaching the £1 level — will it fall below this week? We think it’s a strong possibility.
- Next shares are down over 30% in 2022.
- The company’s share price fall is in part due to soaring inflation which is eroding discretionary spending, with its website traffic declining significantly since October 2021.
- Over the weekend it was reported over the weekend that its talks to potentially provide a lifeline to struggling retailer Joules have hit a stumbling block, with Sky reporting that “the two companies are not close to agreeing the terms of an investment from Next.”
- Given current sentiment and rising energy prices, we see Next continuing to fall next week.
- WH Smith will report year-end earnings on August 31.
- The company’s shares are down over 8.2% in 2022.
- WH Smith has been somewhat transformed from a high street shop to a well-known, go-to airport store in recent years, exposing it to travel troubles, but it should benefit from soaring travel demand this year, with passenger numbers hitting 6.3m at Heathrow in July.
- According to a recent note from Barclays, they see WH Smith shares hitting 2,180p, a potential 36% upside from its closing price of 1,398p on August 23.
- While the broader market sentiment may impact its stock price overall this week, we could see an initial jump following its earnings.