Opinions
Teal Linde
Air Canada
AC-T
TOP PICK
May 12, 2025
Stock price when the opinion was issued
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Premium contentWe reiterate AC as a TOP PICK. The company is adjusting to uncertainty over North America air traffic, which is a result of their well diversified route portfolio. Cash reserves continue to grow as debt is retired and shares bought back. It trades at 10x earnings, 3x book and supports a ROE of 125%. We recommend trailing up the stop (from$13.00) to $14.50, looking to achieve $24.00 -- upside potential of 20%. Yield 0%
(Analysts’ price target is $23.74)Started to put in a bit of a bottom a couple of months ago, as did many other airlines. This name's had a big move higher. There are 2 ways to consolidate: in price (sharp pullback) or in time (move sideways). Thinks we'll see consolidation at least for a bit, perhaps with a slight downward bias. (In tech analysis it's called a "flag".) Once done, it should resume the uptrend and move higher.
Once we get into August, put on the brakes or at least assess the risk.
It is a trading opportunity and not a long term hold. There is still upside and there has been insider buying. It has announced an issuer bid. 18% of shares have been bought and cancelled in a year so revenue per share is going up. It is trading at a discount to its American peers and to its historical valuation.
Premium contentHas been poorly managed for many years. Have a BB credit rating. History says that when things go well, they buy back a lot of shares, but don't touch their debt. They need a better balance sheet, stop issuing shares, and totally change of management style. The industry is so competitive that there is no consumer loyalty; consumers buy the cheapest flights online.
Premium contentIf you can wrap your head around buying at the time of a potential labour strike - we reiterate AC is a TOP PICK. With strong demand for international and domestic travel, we don't expect this dispute to be long lasting. It trades at 10x earnings, 3.3x book and supports a robust 99% ROE. Cash reserves are growing, while the company has aggressively retired debt. We continue to recommend a stop at $16, looking to achieve $26 -- upside potential over 30%. Yield 0%
(Analysts’ price target is $25.74)
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)