Opinions
Andrey Omelchak
Air Canada
AC-T
DON'T BUY
Apr 01, 2025
Stock price when the opinion was issued
You might be interested:
Airlines are economically sensitive stocks. Technically, the chart shows a base, which suggests a swing trade. If, and only if, AC arcs up with definite conviction off support of $15 or so, it could head close to $24 (though might not quite make it).
Don't do it until it breaks out. Plus, you'll need a fundamental reason (such as Trump backing off tariffs).
It has rebuilt its balance sheet and the valuation is well below the historical average. It has lagged the U.S. airline stocks even though it has initiated a 12 month share buyback program. It is at a lower price today than the price for share buybacks, recent option offerings and insider buying in February. Travel should come off a bit but not as much as the drop in its stock price. Buy 13 Hold 4 Sell 0
(Analysts’ price target is $24.65)Airline stocks are not long-term holds. Travel is discretionary, especially for pleasure. Most profitable part is business travel, which won't make a full recovery to pre-Covid levels. Air travel to US is suppressed. CAD at this low level doesn't bode well for overseas purchasing power. Massively leveraged balance sheet, plus looming tariffs.
Canada's largest airline just announced resumption of service from the nation's capital to London UK -- signs of global schedule shuffles and adjusting to declining US bookings. We like that debt is being aggressively retired and shares bought back. It trades at 6x earnings, 2x book and supports a robust 108% ROE. We recommend setting a stop at $9, looking to achieve $18 -- upside potential of 28%. Yield 0%
(Analysts’ price target is $23.42)It is trading near the levels seen at the early stages of the pandemic. Trade war fears have dragged down the airlines but this is overdone. Air Canada is at an 80% booking level which is normal. Its flights to the U.S. are down but international business is strong. It makes more money on international flights than domestic. The price is still OK. Buy 14 Hold 2 Sell 1
(Analysts’ price target is $23.09)
Over last 5 years, hasn't generated much stock price appreciation. Trading stock, not buy and hold. New capacity coming to market, consumer being more cautious. Not great environment to buy. Cashflow will be under pressure.