Air Canada Stock Is a Fantastic Deal Right Now

Air Canada (TSX:AC) is a great stock to own, as market fear turns into hope amid falling recession fears.

| More on:
Aircraft wing plane

Image source: Getty Images

With recession and Federal Reserve fears fading away following the release of some cooler-than-expected inflation numbers in the United States, questions linger as to where stocks ought to settle in the second half of 2022 after one of the worst first-half hailstorms in recent memory. Indeed, the second half is off to a hot start, but fears linger that the recent relief bounce will be met with further volatility and perhaps wild swoons that could persist into year’s end.

In any case, the recent 8.5% inflation number was essentially a hair lower than expected. It was mildly good news, at best. Still, stock markets soared over renewed optimism. Sometimes, it doesn’t take much to move the needle higher when almost every investor in the market is fretting over the slew of negatives.

In prior pieces, I’ve highlighted that good news can still happen, and they had the potential to give lift to these markets that have been weighed down by supply-chain woes and inflationary pressures.

Looking ahead, I’d continue to be a buyer of the fantastic deals that still exist in today’s market. At this juncture, it seems like the S&P 500 is about to escape the bear market. Meanwhile, the TSX Index is less than a correction (10%) from hitting new highs.

From fear to hope

It didn’t take long for the euphoria of 2021 to turn into fear and panic. Now, it’s going from fear to hope. And it’s hope that corporate earnings can stand up to big rate hikes and avoid a crash-landing from central banks. The second quarter has been a huge sigh of relief for many shareholders.

While not all firms escaped the season unscathed, I think the recent market run shed light on just how overly bearish everybody has been amid the market’s landslide. As stocks look to push higher, I’d consider chasing the value names with the most room to run.

Consider shares of Air Canada (TSX:AC).

Air Canada

Air Canada stock is starting to really heat up after facing its worst existential crisis in history. The stock is up an impressive 26% year to date. Though shares slipped in June, plunging around 30% off 52-week highs, the name seems to be finding its footing again, thanks in part to fading recession fears and hope that Canada’s top airline can make idiosyncratic improvements to adapt in the new normal.

At $18 and change per share, AC stock seems like a bargain following solid second-quarter numbers that saw demand creep higher. While Air Canada probably won’t see demand return to those pre-pandemic levels, I think robust demand could help fuel a meaningful recovery in shares through year’s end.

Further, fuel costs are coming back down to Earth, all while COVID cases dwindle. Now, nobody knows when COVID will be gone for good. There’s a chance we’ll have to live with it for years. In any case, booster shots and safety protocols should be enough while Air Canada seeks to team up with other airlines to form mutually beneficial relationships. The Air Canada-Emirates partnership, in particular, in intriguing and could help enhance the customer experience. However, it’s unknown as to how much of a boost the strategic move will give Air Canada over the medium term.

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

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »