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 it due for a dip?

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Air Canada (TSX:AC) used to be the stock to beat. It was all the rage back in 2018, with only cannabis stocks taking as much attention. But wow, can things change over a few years – especially for Air Canada stock.

Of course, the main cause for Air Canada stock dropping so low was the pandemic. And the pandemic remains the main reason why the company continues to flounder. While it received bailout cash from the government, it’s still struggling to get travellers back in the air despite demand remaining at highs not seen since before the pandemic.

Shares of Air Canada stock are now up 2% in the last year, which is fine. They’re up 29% in just the last six months! So, there’s still a ways to go to reach 52-week highs. But could AC reach those levels?

What’s been going on with Air Canada stock

The last six months proved positive for Air Canada stock. The company saw a major increase in bookings during the summer of 2022. However, it was the holiday bookings that really increased its shares.

During the third quarter of 2022, Air Canada stock reported that its available seat miles more than doubled compared to the year before. Passenger revenue reached $4.8 billion, three times the year before, and 94% of 2019 levels. And what’s more, earnings before interest, taxes, depreciation and amortization (EBITDA) reached $1.1 billion, compared to a negative $67 million in 2021.

While it still operates at a net loss of $508 million, those losses are improving, down from $640 million the year before. So in the fourth quarter, we could certainly be in for more positive news.

Signs of growth

Earnings are due February 17 for Air Canada stock, and there may already be some positive signs that things are going well. The company announced several new routes to “prepare” for Summer 2023. Demand remains strong, management says, and they want to get ahead of it with more available bookings.

But for investors, a clue could also lie with Air Canada’s purchase of US$300 million in convertible senior notes, due for cancellation July 1, 2025. This will be used to help deleverage its balance sheet, the company said in a statement.

So with more cash coming in, more routes on the way, and more demand than ever, the company looks primed for a strong earnings report. In fact, this cash could bring down its net loss and it could flirt with a profit once more.

Expect more growth?

We now have earnings due in about two weeks. Shares are on the rise, and demand is climbing for summer projections. This could all point to another strong earnings report for Air Canada stock. And should that happen, shares may climb higher.

However, be careful. We are also expected to enter a mild recession this year. This could result in Canadians choosing to hold onto their cash, perhaps waiting to book their trips for the 2023 holiday season rather than the summer.

So I would definitely wait until after this earnings report before buying up Air Canada stock. Is it likely to hit 52-week highs again? Absolutely. Yet, anything could happen when a recession comes around. We’ve seen surprises before, and we could very well see some again.

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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