So far in 2024, the International Consolidated Airlines (LSE: IAG) share price has risen by around 75%.

So what? I don’t have a problem with that move in itself. Big price movements like that are often warranted in the stock market, and IAG’s airline business is doing well.

But with this one there’s some potential danger ahead that I’m concerned about.

Airlines were hit big-time during the pandemic, as everyone knows. Most of the planes were grounded and holidays were cancelled.

A question of survival

The economic shock was so intense it almost dealt a finishing blow for many companies, and IAG was one of them. Goodness knows what would have happened if the pandemic had intensified and the world locked down for longer. We’d probably not have firms like Rolls-Royce Holdings and IAG around anymore.

However, medical science got on top of the virus. Just in time for IAG, Rolls-Royce and others to secure big refunding packages from shareholders and lending institutions.

Make no mistake, those extra billions were needed badly — at the time, it was a matter of survival. Without it, both firms would likely have been in big financial trouble.

But now these businesses have come roaring back. IAG, for example, began posting a profit again as early as 2022. Then there was a huge jump in earnings in 2023. The chart shows the big surge in the share price caused by the improving conditions in the business.

But the gain in normalised earnings for 2024 is forecast to be modest. City analysts reckon we’ll see an increase of around 6% and the same in 2025. So that looks like normal service has been resumed. The turnaround of the business is probably already in the rearview mirror.

Beware of over-enthusiastic stock buying

If that assessment proves to be correct, the share price ‘should’ remain more or less where it is with just a gentle ongoing elevation to reflect the ongoing growth rate from year to year. Instead though, it’s moved to a parabolic phase, and I can’t help but wonder if it’s set to overshoot. 

Speculators might be thinking the stock has some way to go before it gets back to its pre-pandemic highs above 400p. But there’s potential danger ahead. Analysts predict that 2025’s net profit will be in the ballpark of 2018’s. 

However, 2025’s forecast normalised earnings figure will likely be about 26% lower than 2018’s. The disagreement between net profit and earnings arises because of all the additional shares issued when IAG was raising money from the stock market.

So, if 26% is the ratio to factor in, the share price ‘should’ peak at somewhere just above 300p based on the earnings estimates for 2025. As I write on 4 December, it’s at 275p.

I reckon IAG is trading well and might be just about at fair valuation now. But if it goes much higher, the risks of a share price decline will be elevated. I may be wrong but if the current investor euphoria continues, I think we could well see a full-on share price crash in 2025! I’m not buying.