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, what now?

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Air Canada (TSX:AC) shares continue to suffer in this poor market. While the rest of the economy went through a period of growth, it looked like Air Canada stock should have gone through that eventually. Pandemic restrictions were coming to an end, and everyone wanted to travel.

Yet rising inflation and interest rates changed that, not to mention fuel costs that left Air Canada stock raising the prices of tickets. But there’s more to it than these macro issues for the company. And so shares have fallen for another month, down 5% in November alone and 11% year to date.

So, how long will investors have to wait for this storm to end? And does this drop make Air Canada stock a buy or not?

Analysts remain neutral

While there have been some positive notes for Air Canada stock lately, there is still some evidence that investors should remain cautious when it comes to Air Canada stock. Bookings are headed back to pre-pandemic levels. This is positive, and, in fact, bookings have since recovered beyond those levels!

Even so, short- and medium-term profitability remain “severely depressed” thanks to the incredibly low or non-existent bookings that occurred during the pandemic. There is also still uncertainty in aviation markets beyond North America. This will continue to affect the company and its performance, perhaps for years to come.

Still, earnings are positive

During its recent third-quarter earnings results, the company saw a rebound in shares. This came when Air Canada stock announced it saw double its seat sales during the summer and travel continues to thrive. This is expected to continue for the remainder of 2022 and into 2023.

While the recovery in leisure remained strong, it’s the business segment that analysts now have their eyes on. This is where travel and, therefore, high fares could remain stunted in terms of growth — especially with a recession on the way, with businesses not so eager to eat the cost of a trip that could simply be done online.

Therefore, analysts are now looking ahead to the recession. Air Canada stock hasn’t yet proven what its public stock can do during a recession, having been on the market since 2006 right before a major recession.

Any positivity?

There have been some analysts coming in with stronger suggestions about the future of Air Canada stock. One remained positive given the third-quarter earnings. Even in an economic slowdown, years of being unable to travel have put this at the forefront of interest for consumers. Therefore, they’re more likely to stop buying stuff and keep buying travel.

Of course, only time will tell. But Air Canada stock continues to do well, even when compared to its peers in the United States. It’s therefore likely that while the company should continue to struggle during a recession, it will eventually come out the other side.

Bottom line

As always, it’s important to think long term when you’re investing in stocks. And that’s still true for Air Canada stock. This company continues to see bookings rise past the pandemic, even as we see inflation and interest rates ravage Canadian pockets. It could be that this company continues to see at least stable growth next year and come out strong after a downturn. If so, now could indeed be a good time to buy the stock while it’s down.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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