Doesn't like capital intensive, highly unionized businesses that depend on whims of consumer behaviour. Travel problems in Canada. Too high beta for him. Trade it if you want.
Delta vs. Air Canada
Boy, airlines have had their ups and downs. If you've been at Pearson Airport.... Airlines have pricing power, so they can charge higher given pent-up demand. But he's concerned with business travel. Airlines don't make their money off family vacations, but businesspeople paying more for their flights. A lot of these people are still Zooming and slow to jump into planes. Secondly, the higher fuel costs and possibly higher wages worry him. All airlines are complaining about finding staff.
Revenues are growing. Last week's numbers show people are coming back to travel. Demand is surging. Airport infrastructure is the issue short-term. Terrific job in the downturn of solidifying the balance sheet. Down 75% from its peak, valuation well positioned.
They've had to cancel flights, but it does heighten demand. Recovery keeps getting delayed. Reasonable 7.9x 2024 PE. Cheaper than US airlines. Balance sheet has blown out, but should normalize with growth. Airlines are not good wealth builders, but good trades. Buy now, take it off between $24-28 over the next 2 years.
If you own it now, hang on. Fuel prices have come down. Operational issues have hurt revenues. Leisure travel has picked up, so demand is there. Chart says oversold. Wait until at least $20, the next resistance level, to make a decision.
It has been volatile over the past two years. There are better ways to invest in the transportation sector. His preferred pick in this sector is TFI International which operates in the trucking industry and has a better return and is more stable. If you want to buy Air Canada pick a level you're comfortable with and put in a bid for a part position.
Right before Canada Day last week. Air Canada announced it will cancel over 15% of its flights this summer. On July 4, it was reported that Air Canada ranked no. 1 in delays on the July 2-3 weekend as two-thirds of all its flights (717 in total) landed late. One assumes that the reason is the same that's plaguing many airlines around the world: lack of staff. However, on July 4, BNN reported that Air Canada staffing levels are at 97% of pre-pandemic levels. Blame has to be pointed at the Liberal government which still mandates the ArriveCAN app to help screen for Covid, even though Ottawa removed random Covid testing in June to ease airport congestion.
John: He's been buying recently. Consumer discretionary stocks have been crushed. Travel will pick up again, especially domestic travel. Modified planes to take on more cargo. Solidified the balance sheet. Valuation looks impressive, down 75% from the pre-pandemic peak.
Its revenue in 2020 was down over 90% and is down now only 9%. It is oversold and back at the 2020 price but doing much better than 2020. It is also de-leveraging. There is tight capacity as well as pent-up demand for the airline industry. Buy 12, Hold 5, Sell 0. (Analysts’ price target is $29.13)
Assuming a good bounce in travel which has already started, the airlines are in a strong position operationally. Shareholder equity was wiped out during Covid but a return to positive earnings will help rebuild that base. Air Canada is sitting on a lot of cash but the headwind for this quarter is the price of fuel. Many people have booked in the winter and spring so the increased costs cannot be passed along yet. Although the amount of travel in the Pacific is still weak there should be profitability soon.. Not cheap in Price per Book but good on a P/E bounce back. It is on the positive side of speculative.
A big recovery in travel is already happening. AC enjoys a duopoly with Westjet and will manage well against the discount airlines. When cross-border travel returns in the next few years, AC will do very well. Airlines were loved by investors before Covid and he expects that to return.
You can pick away at the airlines, but there are cost pressures like labour and fuel. The demand for summer travel will offset that with consumer spending their excess cash on experiences. Buy a bit now then maybe add more in June or July.
Likes, but sold on strength. In 18-24 months, airlines should do well because of pent-up demand for travel. Over time, will recover some of the $50 pre-pandemic price, but may not get back to that level. Geopolitical and recession concerns, but they're overstated. Prefers $20 level, but RSI is only 43 right now. If you bought now, held for 24 months, you should still do well.
It was at $50 before Covid, then they did a lot of refinancing during Covid, but AC are in a strong position as we reopen. Demand to travel is strong. Will rise into the $30s, then gradually grow. (Analysts’ price target is $29.75)
Air Canada is a Canadian stock, trading under the symbol AC.TO (previously AC-T on Stockchase) on the Toronto Stock Exchange (AC-CT). It is usually referred to as TSX:AC or AC.TO