Air Canada (TSX:AC) Stock Investors: Hear What the CEO Has to Say

Air Canada (TSX:AC) stock has been extremely volatile since the year began. If you want to know the future, just listen to the company’s CEO.

| More on:
Double exposure of a businessman and stairs - Business Success Concept

Image source: Getty Images

Air Canada (TSX:AC) stock is in trouble. When the year began, shares were priced at $50. This week, they fell below $17.

The stock market clearly doesn’t know how to value the company. Value investors say this is a fantastic opportunity to buy low. Industry analysts warn that more trouble could be ahead. What’s the truth?

To understand Air Canada, why not go straight to the source? On the latest investor conference call, company executives revealed some incredible predictions, as well as estimates for when conditions will return to normal.

Here are the facts

Let’s get the bad news out of the way first.

“We’re now living through the darkest period ever in the history of commercial aviation, significantly worse than the aftermath of 9/11, SARS, or the 2008 global financial crisis,” Air Canada CEO Calin Rovinescu said.

There’s no denying that the current crisis is unprecedented. Few industries have felt as much pain as airlines. Most companies have slashed capacity by at least 60%. At the peak of the crisis, some reduced capacity by 95%. Already, several large carriers have gone bankrupt. More are expected before the year is finished.

“For Air Canada, the pandemic and government-imposed lockdowns and travel restrictions the world over have ended a run of 27 consecutive quarters of year-over-year revenue growth,” Rovinescu continued. “And there is little doubt that we are not yet out of the trough.”

These are some important comments. In 2012, Air Canada stock was valued under $1. Over the next eight years, it rose 50 times in value, thanks to an incredible streak of revenue growth. This is a big reason why value investors are jumping in. They’re hoping that once the crisis ends, the company will return to growth, which would present hefty upside.

However, the second part of his comment is just as critical. It’s going to be a while before conditions normalize.

“Realistically, we expect it to take at least three years for Air Canada to get back to 2019 levels of revenue and capacity,” Rovinescu concluded. “You know that some of the manufacturers have come out and an estimated three to five years. Boeing and Airbus, I think both have estimates in that range.”

Most airlines are expecting at least three years of depressed revenue. Plane manufacturers think it could be closer the five years. Whatever the case, don’t expect a quick turnaround here.

Buy or sell Air Canada stock?

There’s no doubt that this stock is cheap, at least compared to its historical trading range. But is it a buy?

When possible, it’s helpful to see what investing legend Warren Buffett is doing. Last year, he was a leading shareholder of four different airlines. Today, he owns zero.

Buffett clearly doesn’t view this as a time to buy low. There’s just too much uncertainty here. What will happen between now and 2023 is anybody’s guess. The resulting industry will be changed forever, and what happens to Air Canada’s stock price is difficult to predict.

There are several bargain stocks worth buying right now, but there’s just too little visibility to take a bet on airlines.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ryan Vanzo has no position in any stocks mentioned.

More on Coronavirus

Dad and son having fun outdoor. Healthy living concept
Dividend Stocks

1 Growth Stock Down 15.8% to Buy Right Now

A growth stock is well-positioned to resume its upward momentum in 2024 following its strong financial results and business momentum.

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Stocks for Beginners

3 Things About Couche-Tard Stock Every Smart Investor Knows

Couche-tard stock (TSX:ATD) may be up 30% this year, but look at the leadership and history of the stock to…

Read more »

Plane on runway, aircraft
Coronavirus

Can Air Canada Double in 5 Years? Here’s What it Would Take

Air Canada (TSX:AC) stock has gone nowhere since 2020. Can this change?

Read more »

Senior housing
Stocks for Beginners

Home Improvement Stocks Are Set to Fall (When They Do, Buy These Like Crazy!)

Home improvement stocks are due to drop further in the coming months. But with solid underpinnings for the sector, it…

Read more »

An airplane on a runway
Coronavirus

Forget Boeing: Buy This Magnificent Airline Stock Instead

Boeing (NYSE:BA) stock is looking risky right now, but Air Canada (TSX:AC) stock? Much less so.

Read more »

Man considering whether to sell or buy
Stocks for Beginners

Goeasy Stock: Buy, Sell, or Hold?

When it comes to smart buys, goeasy stock (TSX:GSY) is up there as one of the smartest money can buy.…

Read more »

Woman has an idea
Stocks for Beginners

Here’s Why Magna International Is a No-Brainer Value Stock

Magna stock (TSX:MG) has been climbing back once more, but still offers huge value for long-term minded investors.

Read more »

Aircraft wing plane
Coronavirus

1 TSX Stock Down 60% That Could Bounce Back Stronger

Air Canada (TSX:AC) stock got severely beaten down in the March 2020 COVID crash. Here's why it's probably not going…

Read more »