Why I’m Buying Shares of This TSX Stock Hand Over Fist

Air Canada (TSX:AC) is a deeply discounted TSX stock that could make fortunes this decade, just like it did in the 2010s.

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Air Canada (TSX:AC) is a Montreal-based company that provides domestic, United States, transborder, and international airline services. It is the largest commercial passenger airliner operating in Canada. Today, I want to discuss why I’m looking to snag as many shares of this TSX stock as I can in the days and weeks ahead. Let’s jump in.

How has this TSX stock performed over the past year?

Shares of Air Canada have dropped 19% year over year as of close on March 15. The stock is down 4.9% so far in 2023. Despite the recent dips, this TSX stock has recovered in part from the devastating losses it suffered in the early days of the COVID-19 pandemic. Regardless, Air Canada still has a long way to go to challenge the all-time highs it posted in late 2019 and January 2020.

Can you trust the airline industry in 2023 and beyond?

Few sectors suffered as badly as airlines in the face of the COVID-19 pandemic. The generational health crisis forced Air Canada and its peers to cancel flights and, in the best-case scenario, significantly draw down on passenger traffic. Unsurprisingly, this led to a huge dip in revenues and earnings.

When the negative impacts of the COVID-19 pandemic were made apparent in 2020, the airline industry was forced to accept a hard road ahead. Indeed, the International Air Transport Association (IATA) and other experts estimated that it would take three to five years for a full recovery. Last month, the IATA revealed that total passenger traffic posted 64% growth in 2022 compared to the previous year. Meanwhile, full-year 2022 traffic reached 68.5% of pre-pandemic levels. Better yet, December 2022 passenger traffic reached 76.9% of the December 2019 level.

The airline industry cannot boast of a full recovery just yet, but it has made impressive strides in a relatively short period. It is on track to looking like its pre-pandemic self by the end of 2023 or the beginning of 2024. However, the prices of airline stocks like Air Canada remain at enticing price levels.

Air Canada: Why I’m stacking shares of this TSX stock right now

This company released its fourth-quarter and full-year fiscal 2022 earnings on February 17, 2023. Air Canada achieved record fourth-quarter passenger revenues of $4.06 billion — more than doubling compared to the fourth quarter of fiscal 2021. EBITDA stands for earnings before interest, taxes, depreciation, and amortization, and it aims to give a better picture of a company’s profitability. Air Canada delivered adjusted EBITDA of $1.45 billion for the full year — a massive swing from a negative adjusted EBITDA of $1.46 billion it posted in fiscal 2021.

Looking ahead, the company stated that it aims to increase its available seat miles (ASM) capacity by 50% in the first quarter of fiscal 2023 compared to the first quarter of 2022. It projects full year fiscal 2023 adjusted EBITDA between $2.5 billion and $3.0 billion.

Shares of Air Canada are trading in favourable value territory compared to its industry peers. The Relative Strength Index (RSI) is a technical indicator that measures the price momentum of a given security. This TSX stock last had an RSI of 22, putting Air Canada well in oversold levels. Now is a great time to snatch up this growth stock at a deep discount.

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 Ambrose O'Callaghan 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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