Should Investors Have Cargojet Stock on Their Watchlist?

Cargojet (TSX:CJT) stock has gone through many jumps in the last five years but is down significantly in 2023. So, what now?

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Cargojet (TSX:CJT) stock has had quite the turbulent few years. Shares exploded, and dropped, exploded, and dropped again. Now, we’re in one of the dropping periods, but does this mean Cargojet stock should go back on your watchlist?

What happened?

Over the years, there were several points of interest for investors to take a look at. Perhaps one of the more important recent movements was in 2019, when Cargojet stock announced it would have a strategic partnership with Amazon. This was even before the pandemic; Cargojet saw the future of e-commerce growth and wanted to expand.

Amazon was then given the ability to acquire up to 9.9% of Cargojet’s voting shares at $91.78 per share. This would warrant a six-and-a-half-year deal, with Amazon delivering up to $400 million in business volumes during that period. After that, it could acquire up to 14.9% of shares, bringing in an additional $200 million in business. This was then expanded on in 2021.

The company also made partners with music artist Drake that year, before moving forward more recently with a deal with DHL in 2022. The company was brought in for a five-year term with a renewal option to add two years after that and allow DHL to lease its aircraft services. This service should be up and running late 2023 to early 2024.

As you can probably guess, during each period of partnership, there was another round of growth. Yet shares are down from those past substantial highs. So, what gives?

Investor fear

Cargojet stock is down 34% in the last year and 15% year to date. The stock continued to sink after the economic downturn started last year and has fallen ever since. It seems that the growth seen during the pandemic was merely temporary, as investors wanted to take their returns and hoard cash for a while.

While this strategy certainly makes sense if you need the money, there isn’t a great reason to divest your shares in Cargojet stock at this point. While all these partnerships led to short-term jumps, it’s the long game that investors should be concerned with.

As you can see, each of these partnerships signed up for multiple years of growth. In fact, the DHL deal isn’t even up and running yet! That means there is plenty of revenue coming the way of Cargojet stock.

What’s more, the company has also increased its destinations around the world, adding several new aircrafts as well. This had led analysts to state that these recent drops are way overdone.

What to consider now

The market is starting to turn, and when it does you should definitely have Cargojet stock on your watchlist. Analysts continue to peg the potential upside at about $150 or higher these days. That’s an upside of 50% as of writing.

While earnings revenue fell short of estimates, the company still managed to produce a $30.5 million profit during the latest earnings report. While the near term looks more conservative, long-term analysts believe the stock will be an outperformer.

Overall, Cargojet stock remains a strong long-term performer and is quite solid thanks to its long-term contracts. What’s more, should there be any more partnerships in the near future, Cargojet stock could certainly soar upwards once more.

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.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Amy Legate-Wolfe has positions in Cargojet. The Motley Fool has positions in and recommends Cargojet. The Motley Fool recommends The Motley Fool has a disclosure policy.

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