75% potential return! Is this growth stock a screaming buy to consider?

With so many underappreciated growth stocks listed in London, UK investors have plenty of opportunities to explore in 2025. And one company that’s getting a lot of attention from institutional investors is International Consolidated Airlines (LSE:IAG).

With the long-haul travel industry making significant recovery progress over the last two years, sentiment surrounding IAG (as the business is more commonly know) has been warming. And for existing shareholders, that’s already translated into a 70% gain over the last 12 months.

However, despite this impressive performance, it may just be the tip of the iceberg. In fact, back in April, the analyst team at JPMorgan issued a massive 550p share price target for IAG. Compared to where the stock’s trading after its recent bull run, that presents a 75% potential capital gain on the horizon.

So what’s behind this exceptionally bullish forecast? And should growth investors be considering this stock for their portfolios?

Digging into the details

There are five primary factors driving JPMorgan’s conviction:

1. Rising demand for transatlantic flights, particularly in premium cabins that produce wider profit margins.
2. Higher ticket prices, thanks to industry recovery trends paving the way to improved revenue per available seat kilometre.
3. Cost-cutting initiatives to drive superior operational efficiency.
4. Prudent seat capacity discipline.
5. The launch of an aggressive share buyback programme.

Combined, these factors pave the way for superior growth and more robust profitability that could help it surpass many of its rivals. And JPMorgan isn’t the only institutional investment group that’s identified this potential opportunity. RBC Capital’s similarly bullish, as is Peel Hunt and Jefferies. Although these three firms have been more conservative with their IAG share price targets at 440p, 420p, and 400p respectively.

The bear case

Even with its strong, bullish stance, JPMorgan isn’t blind to the risks IAG has to endure. Geopolitical turmoil’s generally not good for the airline industry and could become disruptive if the situation escalates. Beyond potential flight cancellations, war often pushes up the price of oil. And for airliners, that creates notable uncertainty when it comes to the price of jet fuel.

At the same time, macroeconomic pressure on discretionary consumer spending could undercut the resurgence of premium cabin demand, placing pressure on recovering profit margins. And if labour disputes start to emerge either internally within IAG or externally with airport staff, further revenue disruptions could emerge.

The bottom line

Despite these risk factors, IAG’s improved and strengthening fundamental position grants management some welcome flexibility while also providing some financial resilience. However, this perspective was back in April when oil prices were closer to $62 per barrel. Today, in light of the latest conflicts in the Middle East, the commodity has surged to $75.

That’s likely going to have a significant impact on margins and something to watch carefully when management releases its next trading update. Given the potential for a nasty surprise, I’m keeping this growth stock on my watchlist for now despite its seemingly strong share price potential.