Stock price when the opinion was issued
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.
Has 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.
We 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)