I’ve been overly bearish on CargoJet (TSX:CJT) of late. And for good reason. This company’s financial picture isn’t as great as its monopoly on air freight in Canada would suggest.
However, being the optimists we are at The Motley Fool, let’s look on the bright side. Here’s my bullish take on why investors may like this stock after its drop of more than 30% from its 52-week high.
Long-term growth thesis remains strong
As a key purveyor of air freight in Canada, CargoJet has benefited tremendously from recent pandemic-induced lockdown restrictions. E-commerce demand has surged, and the demand for air cargo remains higher than ever today.
Accordingly, CargoJet’s top-line growth of 34.4% in 2020 and adjusted EBITDA growth of 86.8% is nothing to sneeze at. This company is growing. Indeed, growth investors are taking notice.
Besides its strong financial outlook, several other catalysts make for an easy bull case for CargoJet.
CargoJet’s near-monopoly on the Canadian air freight business is the key reason many investors own this stock. The company’s well-timed Air Transportation Services Agreement with Amazon has made this the case. There’s certainly the case that can be made that CargoJet’s cornering of this market is likely to pay dividends (figuratively and literally) over the long term.
As e-commerce continues to take off, and CargoJet remains the only option for air freight in Canada, there are expectations this stock could see impressive growth over the long term. The thesis is pretty simple. But today, investors are increasingly looking for simplicity in portfolio construction.
Analysts bullish on CargoJet stock
Several analysts are now bullish on CargoJet, given these aforementioned factors. Indeed, the company’s resilient core business, stability in terms of contracts, and position in the e-commerce sphere are among the key factors noted by analysts as reasons to own this stock. In fact, analysts believe that the company will continue to enjoy e-commerce tailwinds over the long term, as the segment is far from reaching its saturation point.
That’s not it.
Currently, CargoJet operates to and from 16 major airports in Canada, providing overnight delivery to more than 90% of the Canadian population. An ideal blend of its scale, operational efficiency, and cost-effectiveness has placed it in the league of outperformers.
With the Amazon partnership in place, analysts are quick to point out potential international expansion opportunities. Indeed, the argument can be made that CargoJet’s moat is simply too large to be penetrated by other players. This paints a very rosy picture for this stock.
