Should You Buy Air Canada (TSX:AC) in 2022?

After two years of the pandemic, is 2022 the year in which this Canadian airline stock finally takes off and soars?

| More on:
Plane on runway, aircraft

Image source: Getty Images.

Air Canada (TSX:AC) was one of the hardest-hit stocks in Canada when COVID-19 came along. The company’s revenues plummeted when the global health crisis became widespread and grounded most flights flying domestically and internationally. Like all airline companies, Air Canada has several fixed costs that it had to contend with, despite not generating significant revenues.

As its revenues declined further in 2020, Air Canada stock’s share price nosedived by almost 77%. Most stocks trading on the stock market went through similarly drastic declines during the initial weeks after the onset of the pandemic. However, most of them managed to recover to their pre-pandemic levels in the following months and reached new all-time highs. Air Canada stock never managed to even come close.

A false sense of hope

2021 saw Air Canada stock slowly start recovering. The advent of vaccines for the novel coronavirus spurred a new sense of hope among Canadian investors. The anticipation was that business would begin booming for Air Canada soon, and investors would see significant shareholder returns through a swift recovery.

The first few quarters of fiscal 2021 showed some signs of life in Air Canada stock, but that swift recovery never came. Air Canada still posted several quarters of losses, and it has been on a downward trajectory for the last few months. But fortunately, it is still a long way away from its 2020 pandemic lows.

A new variant of the COVID-19 virus has come along in recent weeks, and it is making matters worse. Air Canada has seemingly gone from being an undervalued stock to being a speculative investment in the current environment.

Foolish takeaway

While we are in the middle of a surge of new COVID-19 cases due to the Omicron variant, the situation seems a little more hopeful than it was in 2020. Omicron has led to lockdowns and travel restrictions, but we are seeing much higher vaccination rates this time around. The new variant appears to be contagious, but its symptoms have not been as severe.

Hospitalization rates have been considerably lower for vaccinated people. It means that there is hope for higher vaccination rates, eventually allowing the world to move past the pandemic. While the surge in new cases is ongoing, we are looking at the pandemic largely easing up. More people are becoming vaccinated, and booster shots have become available to everyone who needs them.

And it has not all been bad news for Air Canada stock during all this. The previous quarterly performance report showed that Air Canada generated $2 billion in revenue, up by almost 200%. The airline’s operating losses were reduced to half, and its net loss fell by $45 million.

If you have been looking for signs that can tell you whether Air Canada stock could be a turnaround bet for 2022, they are all there. At writing, Air Canada stock is trading for $21.13 per share. It’s trading for an almost 60% discount from its pre-pandemic highs. It will be some time for the stock to reach those levels again, and it is likely to face more short-term challenges. But a recovery in the airline stock could be on the cards this year.

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. The Motley Fool has no position in any of the stocks mentioned.

More on Investing

Oil pumps against sunset
Energy Stocks

Is it a Good Time to Buy in the Energy Sector?

Boosted by a very bullish supply/demand environment, energy stocks like Canadian Natural Resources and Tourmaline have much further to go.

Read more »


2 Stocks to Buy Offering Better Value Than Air Canada

Air Canada has been a popular stock for years, but despite its low price, these two picks are much better…

Read more »

money cash dividends

How to Make $373/Month in Passive Income With These 2 TSX Stocks

You could bring in passive income of $4,482 annually, or $373 per month!

Read more »

clock time
Stocks for Beginners

3 Stocks to Start Investing Today

Looking for a set of stocks to start investing today? Here are some great options that offer growth and income…

Read more »

investment research
Dividend Stocks

Young Investors: Create Cash Flow With This Top Dividend Stock

If you're a young investor looking for cash flow, you need a strong dividend stock and solid banking program designed…

Read more »

Illustration of bull and bear

Is the Stock Market Selloff Over?

Throughout this week, many stocks have been gaining value and rebounding from their lows. So, is the stock market selloff…

Read more »

potted green plant grows up in arrow shape

Retirement 101: How Investors Can Turn $20,000 Into $500,000 in 25 Years

These top TSX dividend stocks have made some investors rich.

Read more »

Hand writing Time for Action concept with red marker on transparent wipe board.
Dividend Stocks

3 Superb Dividend Stocks I’m Ready to Buy

The market is full of great options for income-seeking investors. Here are three superb dividend stocks to buy now.

Read more »