Air Canada and Cineplex: How COVID-19 Changed the Fate of These Top TSX Stocks

Air Canada (TSX:AC) and Cineplex (TSX:CGX) both have been notably weak since last month on Delta variant fears.

| More on:
investment research

Image source: Getty Images

Every time we think we are getting closer to the end of the pandemic, a fresh wave hits and shatters our re-opening hopes. Imagine the potential scenarios for Air Canada (TSX:AC) and Cineplex (TSX:CGX), which have been operating at near-zero capacities since last March. After charring billions of dollars in losses since last year, a thorny road filled with uncertainties lies ahead for both of them.


Cineplex has lost almost 65% of its value during the pandemic. The theatre chain company announced that it re-opened all of its theatres last month. While the second-quarter results indeed painted a rosy picture, the Delta variant has weighed on its stock. CGX stock was quick to exhibit weakness, dropping 25% since last month.

In Q2 2021, the company reported total revenues of $65 million, representing a 195% growth compared to Q2 2020. Even if that looks encouraging, its 2019 annual revenues were $1.6 billion and it could take a while for Cineplex to reach those levels. Vaccinations will undoubtedly drive the loosening of restrictions. However, how fast that will increase the footfall at the screens will be interesting to see.

In addition, OTT platforms have added to Cineplex’s woes and might delay recovery in the post-pandemic environment. So, I think sustained profitability at Cineplex could be a distant dream, at least for now.

Air Canada

The flag carrier has lost more than half of its value because of the COVID-19 since last year. However, I am more optimistic about Air Canada for several reasons. First, it has a strong balance sheet that could fund its growth plan post-pandemic. Its liquidity position further strengthened after a larger-than-expected stimulus package from the Canadian government.

Air Canada’s top-line could remarkably recover in the next few quarters, driven by pent-up leisure travel demand. Business travel will likely see muted growth, but leisure travel could offset that slump to some extent. Coupled with higher demand, Air Canada’s leading market share and operating efficiency should fuel a faster recovery in the next few quarters.

Canada’s biggest airline might increase its operating capacity gradually amid air travel demand recovery. As seen in the first half of 2021, decent revenue growth could lower its cash burn and will likely drive Air Canada toward profitability.

In addition, U.S. airlines were quite confident of their recovery before the Delta version spoilt the rally. Higher demand and rapid vaccinations could drive relatively faster recovery in the next few months. As a result, Air Canada could soon follow its south of the border peers and end the year-long underperformance.


I think AC stock is a better recovery play because of its favourable risk-reward proposition compared to Cineplex. CGX stock looks like a speculative play, and its financials might remain tight for the foreseeable future. On the other hand, AC stock looks attractively valued and well placed to benefit from the pent-up demand.

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 recommends CINEPLEX INC. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

More on Coronavirus

healthcare pharma

TSX Stocks in the Healthcare Industry: Which Ones Are Worth Your Money?

These healthcare stocks all offer different investment opportunities for investors, but which are the best buys on the TSX today?

Read more »

Man considering whether to sell or buy

Air Canada Stock is Down 16% – Time to Buy?

Air Canada stock has sure taken its bruises. Will recovering demand this year and next be enough to offset rapidly…

Read more »

little girl in pilot costume playing and dreaming of flying over the sky

Air Canada Stock: How High Could it go?

AC stock is up 29% in the last six months alone, so should we expect more great things? Or is…

Read more »

eat food

Goodfood Stock Doubles Within Days: Time to Buy?

Goodfood (TSX:FOOD) stock has surged 125% in the last few weeks, so what happened, and should investors hop back on…

Read more »

stock data
Tech Stocks

If I Could Only Buy 1 Stock Before 2023, This Would Be It

This stock is the one company that really doesn't deserve its ultra-low share price, so I'll definitely pick it up…

Read more »

Aircraft Mechanic checking jet engine of the airplane

Air Canada Stock Fell 5% in November: Is it a Buy Today?

Air Canada (TSX:AC) stock saw remarkable improvements during its last quarter but still dropped 5% with more recession hints. So,…

Read more »

Airport and plane

Is Air Canada Stock a Buy Today?

Airlines are on the rebound. Does Air Canada stock deserve to be on your buy list?

Read more »

A patient takes medicine out of a daily pill box.

Retirees: 2 Healthcare Stocks That Could Help Set You up for Life

Healthcare stocks offer an incredible opportunity for growth for those investors who look to the right stocks, such as these…

Read more »