It’s said that every cloud has a silver lining, and when it comes to the dark clouds of a market crash, there is more than just one silver lining. One of them is the chance to buy recovery stocks and harness the power of rapid growth to expedite your portfolio’s maturity. The last market crash was no exception, and if you had bought Air Canada (TSX:AC) when it hit rock bottom, you’d have easily doubled your stake in the company by now.
But what about people who had this stock before the market crashed? Air Canada was one of the most desirable growth stocks, and if someone had bought into the company in 2019, they might still have a long way to go to make a profit on their Air Canada bet.
There is another category of investors: those who haven’t bought Air Canada yet. If you are in this category, and you are thinking about whether or not Air Canada is still worth buying, there are a few things you have to keep in mind.
Air Canada’s future prospects
Air Canada management projected that it would at least take a couple more years before the airline sees operational activity resume to the pre-pandemic levels. And if the vaccine rollout is delayed further or a more resilient strain of the COVID starts ramping up new cases, the projection can be delayed even further.
As of now, the general theme is recovery. The airline, traveler confidence, and investor sentiment are all leaning towards recovery. There are also hopes for a government grant finally arriving, which might soothe Air Canada’s financial woes, at least in part. The company is focusing a lot on its cargo business and is exploring new avenues of growth in this area.
But there are new challenges as well. Jet fuel prices have hit a new high, and it will still be a couple of months before the airline can start flying to some of its profitable “sun destinations.” The financial losses it’s continually sustaining because of minimal operational activity will keep haunting Air Canada’s books for years to come.
Is it still worth buying?
That is a tricky question. During its peak, the company hit a share price of $51. If its current recovery momentum carries it to this valuation point and a little further, then buying now might help you double-up your investment. But it might not happen as quickly as you might expect. The investors will get a reality check once the company publishes its next quarter’s result.
And even though investors might be expecting a loss, if it’s as bad as previous quarters (or worse), then it might dampen the recovery spirit. If that happens, the stock growth might slow down a bit, but the chances that it will stop altogether are quite low.
Air Canada’s major strength is still its dominant position. It might become even more powerful if the Transat deal goes through. Once the restrictions are lifted, and people start getting over their fear of the virus, chances are that Air Canada might see a swift recovery. Therefore, Air Canada might be worth buying, even if it takes a few years to double your money.
Speaking of Air Canada stock and is it worth considering in 2021...
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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 Adam Othman has no position in any of the stocks mentioned.