Air Canada (TSX:AC) and BlackBerry (TSX:BB)(NYSE:BB) shares are back on the retreat after their respective bounces, but are such pullbacks in each popular Canadian stock warranted? Or could each name be ready to make a parabolic upside correction into year’s end?
In this piece, we’ll have a closer look at each speculative stock to see which, if either, is worth picking up on recent weakness.
Air Canada: A Turbulent ride for hungry investors
Air Canada stock has been on the steady decline ever since the COVID vaccine-driven rally ran out of steam in December. While the shot in the arm to AC stock was potent, investors must understand that any further vaccine news is unlikely to be a needle mover (sorry for the pun!) on shares of AC moving forward.
With the stock now down over 25% from its December high at $20 and change, I think it makes a ton of sense to step in with a contrarian position here if you’re willing to put up with excessive amounts of turbulence that will persist for at least another few quarters.
What can cause even more turbulence in Air Canada stock?
There have been ample vaccine logistical challenges of late, which could delay the end of this pandemic. And with the threat of COVID variants lingering in the background, AC stock could easily fall back into the teens over the near term, as I predicted a few weeks ago, before its next sustained leg higher.
The latest slate of travel restrictions that aim to curb the spread of COVID-19 has weighed heavily on Air Canada stock. That said, I think the company will be given a “free pass” by strong-handed investors for its upcoming quarter and think shares are ridiculously undervalued here, given the light at the end of the tunnel.
Air Canada’s large internationally focused segment faces an uphill battle in 2021. But such pronounced pressures, I believe, are already reflected in the stock by its relative discount versus some of its domestically focused peers south of the border.
If you’re not easily rattled by volatility, I’d look to initiate a starter position now, while investors have the jitters over Canada’s latest travel restrictions. AC stock trades at 3.5 times book value — a modest price to pay for a company that could find itself highly profitable again in as little as 18 months.
BlackBerry: Still ripe for picking amid WallStreetBets hype
After hibernating for many years, BlackBerry stock returned to the spotlight of the mainstream financial media with a bang. A slew of good news excited BB shareholders in the fourth quarter of 2020, but it was the accumulation of shares by short-squeezing traders at Reddit forum WallStreetBets (WSB) that really sent the stock skyrocketing into the stratosphere.
There’s no telling whether WSB is done with BlackBerry (it appears that the folks at WSB have since moved on to shinier things with silver), I still think BB stock is worth nibbling on after the stock’s latest dip. In many prior pieces, I’ve noted real fundamental reasons why BlackBerry stock deserved a re-valuation to the upside.
After shares recently got cut in half, BB stock is a compelling speculative buy. Although I’d much prefer waiting for an even larger pullback if you’re not keen on buying alongside weak-handed (or, as referred to by the WSB community, “paper-handed”) speculators who are just in the name to make a quick buck.
AC stock or BB stock: Which is the better buy?
I’d have to go with Air Canada stock here, as I don’t want you to be left holding the bag should WSB traders collectively take profits in BlackBerry. I like the airlines’ recovery trajectory in late 2021 and would be tempted to load up on AC shares if they do make a return to the high teens.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool recommends BlackBerry and BlackBerry.