Why Air Canada Stock Could Soar in 2021

Air Canada (TSX:AC) stock has a number of catalysts lining up to take this stock much higher in 2021!

| More on:
Plane on runway, aircraft

Image source: Getty Images.

I’ve been bearish on Air Canada (TSX:AC) stock for quite some time. I think a lot of this bearishness is still warranted today. That said, there is definitely a rebound story here. I’m going to dive into the bullish arguments supporting why Air Canada stock could soar in 2021.

Pandemic restrictions could be loosened sooner than we think

Various lobbying efforts from Air Canada and its peers in the travel and hospitality sectors are underway. This comes as bailout talks continue between the Canadian government and the airlines.

In my view, the Canadian government is in a pickle right now. If travel restrictions remain overly onerous, the amount of money that the airlines will demand via a bailout will balloon. However, loosening restrictions too early could have a significant cost in lives. All things considered, I think Air Canada will be the beneficiary of loosening restrictions soon. I think the catalyst for such a loosening will be due to the vaccines that are coming available now. The Canadian government will have an “out” to loosen restrictions carefully, saving the sector, and avoiding massive bailout payments, which would not be popular among the voting populace.

Cargo volumes could tide the company over

As pointed out by fellow Fool contributor Sneha Nahata in a recent piece, cargo volumes are a key factor many investors are missing. Air Canada’s ability to utilize its existing capacity to make money via shipping things other than people lessens the pandemic-related blows this airline has faced.

E-commerce demand has spiked, so Air Canada could actually gain traction in a sector the company typically doesn’t focus on. For long-term investors, this is bullish. The more income streams any company can bring in, the better. With Air Canada bolstering its cargo business, the amount of cash this airline is burning could decrease over time. Of course, capacity reductions help as well.

Bottom line

I do think we’ll see a bailout in 2021. Additionally, I think loosening travel restrictions will likely be announced soon. These two key factors combined with operational cost-cutting measures by Air Canada, might be enough to send this recovery stock on a tear in the coming quarters.

Air Canada has some of the best metrics among its North American peers and has been a value pick of mine in the past. It’s always tempting to pick up shares of such companies on weakness. That said, the TSX is filled with a dearth of perennial value picks that stay cheap. Investors looking to time the ascent with Air Canada stock could see a retracement if these catalysts don’t materialize. Therefore, this is a stock I’d recommend for long-term investors only right now looking for value.

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 Chris MacDonald has no position in any of the stocks mentioned.

More on Investing

A close up image of Canadian $20 Dollar bills

3 Canadian Growth Stocks I’d Buy Under $20

These under-$20 growth stocks have the potential to deliver solid returns.

Read more »

A bull and bear face off.
Dividend Stocks

The 3 TSX Stocks to Buy Before a Long-Term Bull Market Begins to Build

The TSX may not go bullish for a while, even when the economy recovers from a recession, but investors should…

Read more »

stock market
Stocks for Beginners

A Bull Market Is Eventually Coming: 1 Stock to Buy Now and Hold Forever

Investors may be uncomfortable in market downturns, but try to stay the course and focus on the long term to…

Read more »

Woman has an idea
Tech Stocks

2 No-Brainer Stocks to Buy With $500 Right Now

Given their solid financials, healthy growth prospects, and attractive valuation, I am bullish on these two TSX stocks.

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

A Bull Market Is Coming: 1 Growth Stock Down 33% to Buy and Hold Forever

Here's why quality growth stocks such as Aritzia are compelling long-term bets for TSX investors.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

TFSA Investors: Make $200 in Monthly Passive Income With This 1 TSX Dividend Stock

Here’s an attractive dividend stock TFSA investors can buy now to earn $200 in monthly passive income.

Read more »

You Should Know This
Bank Stocks

What the Collapse of U.S. Banks Means for Canada’s Big Six

The fear of the U.S. banking contagion spreading to Canada pulled down stocks of the Big Six banks. What should…

Read more »


Want to Retire Wealthy? 3 TSX Stocks to Add to Your Portfolio Now

Do you plan to retire rich? These three TSX stocks have potential to deliver stellar capital gains and make you…

Read more »