The Motley Fool

Why Air Canada Shares Soared Today

Although we don’t believe in timing the market or panicking over market movements, we do like to keep an eye on big changes — just in case they’re material to our investing thesis.

What: Shares of airline operator Air Canada (TSX: AC-B) soared about 20% on Friday after its quarterly update impressed Bay Street.

So what: The stock had pulled back sharply in February on a disappointing fourth quarter, but today’s positive update is quickly easing those concerns. In fact, Air Canada posted systemwide traffic growth of 1.4% on a capacity increase of 3.6% in March, suggesting that the foreign exchange, weather, and capacity headaches that management has been dealing with are slowly letting up.

Now what: Management now expects its Q1 results to be roughly in line with last year, versus its prior view of an EBITDAR decline of $15-30 million. “In addition, based on forward bookings, we expect a strong summer travel season ahead,” said President and CEO Calin Rovinescu. “I would like to thank our employees for their hard work and transporting our customers safely to their destinations despite the ongoing challenges of severe winter weather during the month and the quarter.”

Of course, when you couple Air Canada’s 20% today with the airline sector’s notoriously limited long-term upside, the risk/reward tradeoff seems rather unattractive at this point.

 

 

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

Fool contributor Brian Pacampara owns no position in any of the companies mentioned.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.