Air Canada could have doubled your money quite easily if you had bought it when it slumped down to its all-time low during the peak of the 2020 crash. It got quite close to a single-digit share price, and buying then would have made it an ideal recovery bet.
But what about now? If you buy Air Canada at its current valuation, can it double up your investment before 2021 comes to an end? The share price has reached those values before the pandemic. But it might be difficult to predict whether it has what it takes to reach its pre-pandemic height again or surpass it to double your investment.
Air Canada stock
Air Canada stock is now down 11% from its 2021 peak. It was a gradual slide, and the company has hovered around the same value point for the last two weeks, so the chance of it slipping further might not be very high. But that also means that we can’t be very sure that the stock will soar high and go through another major growth phase.
Investor sentiment around Air Canada is definitely shifting, but people are still wary. Even if the fear of the pandemic is buried deep in people’s hearts, the pragmatic side might be keeping them going all-out on Air Canada, hoping that it might mimic its pre-pandemic growth phase. Partly because of the financial slump the company is in and is likely to stay for at least a couple more years.
So if investors don’t flock to Air Canada and instigate another three-digit growth in less than nine months, the chances that Air Canada can double your money in 2021 are relatively low.
The current strengths and weaknesses
The major strength of Air Canada, which will justifiably keep investors attracted in the future as well, is the company’s resilience. Despite the speculation surrounding the bankruptcy, the company managed to pull through some really tough times. The company survived even though the operational capacity went down to single-digit and international travel revenue, which makes up the bulk of the company’s revenue, almost trickled down to nothing.
It still has a dominant position in the local airline sector. The weaknesses include the financial burden the company is carrying, the slow recovery pace, and the negative speculation around the Transat deal. If the deal goes through, Air Canada might get a significant boost because, along with the assets and debt of Transat, Air Canada will also inherit a major segment of airline business through this deal.
While nothing in the near future is expected to cause the stock to significantly dip or start to tear, we are also not seeing a gradual ascent that might see the stock reach its pre-pandemic height. The situation might change in the next few months. We have yet to see the impact of summer travel on Air Canada’s business and the boost it might get from the government aid that’s expected to come around.
Speaking of Air Canada and whether or not it can double your money 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.