Can Air Canada Stock Double to $40?


Aircraft wing plane

The selloff of airline stocks due to the COVID-19 breakout was abrupt and sudden. Air Canada (TSX:AC) was hoping to post the 28th consecutive quarter of operating revenue growth in the first quarter (Q1) of 2020. Instead, the company incurred a staggering $1.049 billion net loss during the quarter to break its pre-pandemic winning streak.

Canada’s flag carrier will likely end 2022 with 12 consecutive quarterly losses. However, a turnaround could be on the horizon. For the first time since the pandemic began, Air Canada delivered a positive operating income in Q3 2022. In the three months that ended September 30, 2022, operating income reached $644 million compared to the $364 million operating loss in Q3 2021.

Michael Rousseau, Air Canada’s president and chief executive officer (CEO) said, “We stand on a robust foundation and, with our most recent financial results, investments and strategic plan, are confident we have a bright future in connecting Canada and the world.”

Is the long wait over?

Investors have waited long enough for Air Canada to make a resounding comeback. In 2019, the stock ranked seventh in the inaugural TSX30 flagship program for Canada’s 30 top-performing growth stocks. The airline stock’s total return for the year was 86.9%, followed by 53.1% and 7.2% losses in 2020 and 2021, respectively.

As of this writing, Air Canada trades at $19.27 per share, a year-to-date loss of 8.8%. Market analysts covering the stock recommends a buy rating. Their 12-month average price forecast is $27.07 (+40.5%), but the high price target is $40 (+107.6%).

Solid Q3 2022 results

Besides the positive operating income in Q3 2022, Air Canada’s reported a strong 12.1% operating margin during the quarter. Rousseau added, “We achieved significant improvements in other metrics from a year ago. Operating revenues more than doubled to $5.3 billion on capacity growth of 130%.”

Notably, EBITDA (earnings before interest, taxes, depreciation, and amortization) rose year over year to more than a billion (19.9% margin). Rousseau gave credit to Air Canada Cargo for its consistent contribution to the financial results. The airline safely transported about 11.5 million passengers during the quarter, while advanced ticket sales were 95% of Q3 2019 levels.

Other highlights include passenger revenues of $4.818 billion, representing a three-fold jump from Q3 2021 and 94% of Q3 2019. While Air Canada still posted a net loss of $508 million in Q3 2022, it was 20.6% lower than the $640 million net loss from a year ago.

For Q4 2022, management plans to increase Air Canada’s average seat miles (ASM) capacity by 60% compared to Q4 2021 or approximately 85 of ASM capacity in Q4 2019.  

Meanwhile, the freighter fleet is continuously growing, with the 767 cargo aircraft reaching seven by year-end 2023. Air Canada also expects the delivery of two 777 cargo planes in 2024. Horse shipments to the U.S., Latin America, and Europe will also be available soon.

Return to profitability

The International Air Transport Association (IATA) expects the global airline industry to return to profitability in 2023. Air Canada’s three-year nightmare could end, and its share price could double to $40.

The post Does Air Canada Stock Have What it Takes to Double to $40? appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Air Canada?

Before you consider Air Canada, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in December 2022 … and Air Canada wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 16 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 12/13/22

(function() { function setButtonColorDefaults(param, property, defaultValue) { if( !param || !param.includes('#')) { var button = document.getElementsByClassName("pitch-snippet")[0].getElementsByClassName("pitch-button")[0]; button.style[property] = defaultValue; } }

setButtonColorDefaults("#5FA85D", 'background', '#5FA85D'); setButtonColorDefaults("#43A24A", 'border-color', '#43A24A'); setButtonColorDefaults("#fff", 'color', '#fff');>

More reading

Canadians: 2 Air Travel Plays to Watch in 2023 Air Canada Stock Could Take Off in 2023: Should You Board Now? Deep Value on the TSX: 2 Stocks to Buy Before They Rally 3 Top Canadian Stocks to Buy Now Before They Rally These 2 Stocks Have a Lot of Risk But Their Upside Could be Huge

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

https://www.fool.ca/2022/12/27/does-air-canada-stock-have-what-it-takes-to-double-to-40/

Comments

Post a Comment

Popular posts from this blog

Get Rich With These High-Yield Canadian Dividend Stocks

Image
Dividend stocks are one of the smartest ways to create wealth in the long term. By investing in dividend-paying stocks, one can generate returns in two ways: dividends and capital appreciation. As top dividend-paying companies generally have well-established businesses and a growing earnings base, they generate steady capital gains in the long term. Further, the reinvestment of dividends allows investors to accumulate more shares and create wealth in the long term.  With this background, let’s zoom in on three high-yield Canadian stocks that can help you get rich over time.  Enbridge  Enbridge (TSX:ENB) is a must-have dividend stock, and there are solid reasons behind that. Besides offering a lucrative yield of 6.7% (based on its closing price of $53.14 on May 10), the company has a resilient business that consistently delivers steady growth.  Enbridge owns extensive midstream assets and transports oil and gas. In addition, Enbridge has interests in renewable energy faci...
Read more

How much dividend income can you earn?

Image
Passive income. It’s one of the most common financial goals for Canadian investors. Everybody likes making money on a stock trade, but what could be better than a stock that pays you income year in and year out? Such are the kinds of stocks that Warren Buffett and other long-term investors made their fortunes on. This raises a question: Is it possible to make a truly substantial amount of money – let’s say $1,000 per month – with just dividend stocks? Such a thing would be very helpful if it could be done. Consider that, $1,000 per month is more than what the average Canadian gets from the Canada Pension Plan (CPP). If you take the average CPP payment ($811) and add $1,000 per month in dividend income to it, you get to a sum of money that could potentially pay all of your bills. In this article, I will explore the topic of making money with dividend stocks. I will show how much money you’d need to invest to get $1,000 a month in dividend income. I will reveal a stock that...
Read more

RRSP Wealth - Two Top TSX Dividend Securities to Buy Now or Own for 25 Year

Image
The market pullback is giving Registered Retirement Savings Plan (RRSP) investors a chance to buy top Canadian dividend stocks at undervalued prices for a self-directed portfolio focused on long-term total returns. TC Energy TC Energy (TSX:TRP)(NYSE:TRP) has raised its dividend in each of the past 22 years, and investors should see the distribution continue to grow at a steady pace. The energy infrastructure giant operates natural gas pipelines, oil pipelines, and power-generation facilities in Canada, the United States, and Mexico. The $28 billion capital program is largely focused on expanding the natural gas pipeline business, which already boasts 93,000 km of infrastructure. TC Energy has assets that connect the Marcellus and Utica shale plays in the United States to the Gulf Coast, where liquified natural gas (LNG) facilities cool the gas to the point where it becomes liquid and can be shipped to international buyers. In Canada, TC Energy is building the Coastal GasLink pi...
Read more