It is hard to find any other industry other than aviation that has been struck badly by the global pandemic situation. Its impact was so harsh that it can still be felt in 2023. It has been four months since this year started, and the market is expected to recover gradually.
However, whether or not the market is worth an investment, is still a lingering question among many investors. To make your investment decision a little easier, let’s discuss one aviation stock that has significant growth upside over the long term. Here’s why Cargojet (TSX:CJT) could be among the top ways investors can play e-commerce growth over the long term.
Beacon Securities keeping their faith intact in Cargojet
Ahmad Shaath, an analyst at Beacon Securities, lowered his price target for Cargojet in February 2023. At the same time, he stayed bullish on the company’s stock, as he believes that Cargojet’s ACMI (Aircraft, Crew, Maintenance and Insurance) business has growth potential, despite operating in a challenging macroeconomic environment.
The North American air cargo services provider was soaring high at the beginning of the pandemic as online sales took off, resulting in Cargojet expanding its e-commerce shipping capabilities. However, these same shipments began dropping off, as many would reasonably predict.
As per a report by the International Air Transport Association (IATA), the company witnessed the biggest drop that year of 15.3%. However, the company’s North American-Europe market has been showing solid month-over-month growth since these declines began.
In 2023, ACMI continues to be in focus for analysts, driving optimistic outlooks among industry experts that Cargojet can turn things around.
CJT’s Q4 results stronger than expected
Cargojet recently announced its fourth-quarter results, exceeding analysts’ estimates on nearly across the board. The company’s revenue of $267 million was impressive, compared to the $235.9 million reported for the same period in 2021. Adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) also came in at $82.9 million, an increase of $7.6 million when compared to the previous year’s EBITDA numbers.
Unsurprisingly, a strong contribution by Cargojet’s ACMI network resulted in 13.2% (6.1% excluding fuel) revenue growth when compared to its prior year’s performance.
As per Dr Virmani, chief executive officer of Cargojet, a steady increase in the e-commerce sector has aided in the strong growth of the ACMI and domestic sectors.
Looking at the strategic factors that the company used to maneuver through the recession and other macroeconomic factors, Cargojet has potential upside over the long term. The company has a near monopoly on air shipping in Canada, meaning for those bullish on e-commerce expansion over the long run, this is a stock to hold.