Air Canada (TSX:AC) Stock SOARS 22% as Pfizer Vaccine Ignites Buying Frenzy!

Earlier today, Air Canada (TSX:AC) stock surged 22% at open on news of a 90% effective COVID-19 vaccine.

| More on:
Coronavirus written newspaper close up shot to the text.

Image source: Getty Images

Air Canada (TSX:AC) stock surged 22% at market open Monday, as news broke that a Pfizer (NYSE:PFE) vaccine had proven 90% effective in clinical trials. The COVID-19 pandemic had been ravaging airline stocks all year, thanks to the travel bans and mass lockdowns it brought with it. The news from Pfizer was the first unambiguous signal that COVID may be on its way out. While there have been many vaccine efforts this year, Pfizer’s was the first large-scale trial with a high effectiveness rate. A major bullish signal, it lifted all stocks… especially airlines.

Why Air Canada reacted so strongly

It’s understandable that Pfizer’s vaccine news would send stocks soaring. The pandemic nearly shut the economy down, after all, so a treatment is naturally something investors want to see. But Air Canada’s reaction to the news went well beyond most stocks. As of 11 AM Eastern on Monday, AC was up a whopping 22% compared to 2.58% for the S&P 500 and 8.4% for Pfizer itself.

On the surface, this may look confusing. With news of a vaccine, you’d expect pharma stocks to rally the most. What we’re seeing now is not in line with that. However, when we look more closely, we can see clearly that airlines have the most to gain.

First of all, airlines basically need a vaccine to get back to business as usual. Air Canada has been bleeding cash all year due to the collapse in demand for travel, with its third-quarter loss coming in at a whopping $685 million. When you add the first- and second-quarter losses to that, you’ve got over $3 billion in year-to-date losses. On top of that, we’ve got a third wave of COVID-19 taking shape nationwide. Air Canada wouldn’t be able to withstand another wave of lockdowns. Most likely, it would be forced to enter bankruptcy. Now, however, the vaccine brings hope of the pandemic coming to an end in the not too distant future. So, there is real reason for optimism.

Second, many other stocks were already walking off their COVID-19 losses before Pfizer’s announcement. If you look at pharma giants like Pfizer, many of them were priced into the stratosphere last week. The markets expected them to come out with vaccines eventually. Similarly, tech stocks are still posting year-over-year revenue growth, and even retailers are beginning to come back to life. It’s become clear which stocks are still under threat by COVID-19. The ones that aren’t at risk have long since climbed back to their pre-COVID highs. So, the surprise vaccine news has most helped stocks like airlines and hotel companies, which were still reeling from the pandemic as of last week.

A word on the vaccine

Before concluding, it has to be pointed out that Pfizer’s vaccine does not mean an immediate end to the pandemic. To be sure, a clinical study with 44,000 participants and a 90% effectiveness rate is very, very good news. But this vaccine will need to receive many approvals and pass many regulatory hurdles before people can receive it. Hopefully it will. Pfizer’s vaccine is one of seven that Canada has already pre-ordered, which bodes well for our country’s prospects of getting past COVID. Hopefully, its development will proceed smoothly.

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 Andrew Button has no position in any of the stocks mentioned.

More on Coronavirus

Airport and plane
Stocks for Beginners

This Bargain Stock Is the Cheapest It’s Been in Years

This top stock still trades below $25 per share, despite much positive movement. A strong opportunity could be in the…

Read more »

Hands holding trophy cup on sky background
Stocks for Beginners

Here’s Why Shopify Stock Can Be a Long-term Winner

Shopify stock (TSX:SHOP) is still lightyears away from where it was at all-time highs, but those prices could be reached…

Read more »

Coworkers standing near a wall
Stocks for Beginners

Everyone Is Talking About This Stock: Is It a Good Long-term Option?

NFI stock (TSX:NFI) reported record earnings this week, with a huge backlog and production ramp up. So why did shares…

Read more »

stock market
Tech Stocks

A Bull Market Could Be Here: 3 Reasons to Buy WELL Stock

WELL stock (TSX:WELL) may have crashed since the lifting of pandemic restrictions, but after 18 record quarters, it's time to…

Read more »

Airport and plane
Stocks for Beginners

Afraid You Missed Your Chance With This High-Flying Stock? Think Again

Bombardier stock (TSX:BBD.B) continues to experience major demand for its business jets, which is why now is the time to…

Read more »


Stocks With Stamina: 3 Plays That Stayed Healthy Even During COVID

COVID was a good litmus test to differentiate resilient stocks from the rest. These stocks might be viable options, even…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Dividend Stocks

Here’s How Much $1,000 of Loblaw Stock is Worth After 10 Years

Loblaw stock (TSX:L) surged during the pandemic, but could we see that growth again in the next decade? Or should…

Read more »

money while you sleep
Dividend Stocks

Jamieson Wellness: A Healthy Addition to Your Portfolio?

Jamieson stock was on a roll until the last year or so, but now offers a major deal for investors…

Read more »