Since the pandemic started last year, Air Canada (TSX:AC) has been one of the stocks that’s suffered the most. The company was negatively impacted more than almost any other Canadian stock, because it’s so much harder for it to cut costs.
This has been a real problem for investors, as it’s impossible to take a long-term position in a stock that’s losing so much value every day.
That’s why I have been consistent about warning investors to avoid Air Canada’s stock since the start of the pandemic. It was apparent early it would take a long time to recover.
Plus, each day it doesn’t recover, the company loses value, which ultimately means losing recovery potential when the stock does rally.
With that being said, though, if there were ever a time to take a position, it would be now.
Air Canada stock: Time for a buy?
As we continue to move closer to a full recovery in Canada, the optimal time to buy Air Canada stock looks to be nearing. And while some investors may choose to invest soon, it’s still not a stock for everyone.
An investment in Air Canada today still comes with significant risk. The company will continue to lose value every day that it’s not operating near full capacity.
So, you want to buy it as close to its recovery as possible. If you buy too early, it could continue to lose value, and you’re at risk of more waves of coronavirus, causing another bear market and postponing its full recovery.
However, if you wait and buy too late, the stock could rally, and you could miss the recovery potential altogether.
Keep in mind, even if its operations opened back up today, and the stock went immediately to fair value, it would only be worth about $35. That means at roughly $28 a share, which it trades at today, the stock only has about 25% upside.
So, Air Canada stock could be a buy today since the vaccines were announced. However, just because it’s starting to look promising doesn’t mean it’s not without significant risk.
Furthermore, although Air Canada stock’s prospects are improving, other stocks still look more attractive today.
A top Canadian stock to buy now
Rather than Air Canada, I’d consider a stock that still has recovery potential but nowhere near as much risk. There are a few Canadian stocks that fit the bill. However, one that looks the most promising today is the iconic Canadian retailer Roots (TSX:ROOT).
Roots is a retail stock that has struggled for a while now. Despite that, it still has an incredibly strong brand across Canada and offers major recovery potential.
Today, the stock trades with a market value of less than $150 million, making it extremely cheap and well worth buying. The stock is set to report earnings on Friday. These earnings will likely be poor again, as more than half of Roots’s stores are in Ontario and have been closed since the start of April.
However, although the earnings it reports may not be that strong, investors will be waiting to hear its forward guidance and how Roots plans to recover going forward.
Not only is it highly likely Roots will have more recovery potential, we saw earlier Air Canada offers roughly 25% upside for investors. In addition, though, an investment in Roots today will also be less risky.
Should more negative developments occur with the pandemic, investors who buy Roots over Air Canada stock today will likely be better off.
Although Air Canada stock may finally be ready for an investment, there are still plenty of Canadian stocks that are much more attractive today.
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.
The Motley Fool has no position in any of the stocks mentioned. Fool contributor Daniel Da Costa has no positions in any of the stocks mentioned.