Air Canada Stock’s Turbulent Recovery: What Investors Need to Know

Air Canada stock went from buy to buyer beware, but the tides could be shifting for this stock in the near future.

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Air Canada (TSX:AC), once the growth stock on the Canadian market, may slowly be showing signs of recovery. And it’s something investors may want to start paying attention to.

In fact, the entire country continues to see an improvement, as Canadian airlines see far fewer cancellations during the peak travel months compared to last year.

With this news in the books, what can Air Canada stock shareholders, and those looking for growth, do with the stock?

May Day landing

Air Canada stock has a turbulent past. Shares of the stock dropped below $1 back in 2012, with management coming in to swoop in and save the day. After cost savings measures and investments to renew the company, Air Canada stock surged over the next decade.

By 2019, shares reached $50 per share, but when the COVID-19 crash in March 2020 hit, shares plummeted. Since before the pandemic, the share price of Air Canada stock hasn’t surpassed $30.

But after the purchase of a fuel efficient air fleet, government bailouts, new lines of credit, and debt reductions, it might be time to take another look at Air Canada stock.

From beware to buy

Air Canada stock beat out its own records during the latest round of earnings for the first quarter. First quarter revenue achieved a record $4.1 billion, more than double the first quarter of 2022. This came along with a 53% increase in its operating capacity.

Its first quarter operating revenue reached a record as well of $4.9 billion, 90% higher than the year before and 10% higher than the first quarter of 2019. This was before pandemic restrictions hit the company hard.

Its loss has now improved to $17 million, down from $550 million the year before. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also hit $411 million, with cash flows from operations at $1.4 billion. The financial strength sent analysts racing to make recommendations.

“Air Canada’s impressive first quarter performance reflects the strength of our brand, the very strong demand environment across all markets and the effective execution of our strategic plan…Our first quarter financial results exceeded both internal and external expectations and we expect demand to persist, supported by strong advance bookings for the remainder of the year. For this reason, as well as lower-than-expected fuel costs, we increased our 2023 adjusted EBITDA guidance last week.”

Michael Rousseau, President and Chief Executive Officer of Air Canada

Analysts weigh in

Analysts continue to weigh in on the share price of Air Canada stock recommending it a buy with a potential upside of about $30 as of writing. There are still cost concerns such as those from the recent labour contract reopening for pilots, according to one analyst. However, its international long-haul flights are back up and running, a long-time bread winner for the airline.

Now that it’s back near pre-pandemic levels, analysts are confident the stock should continue to improve in the near- and long-term future. It continues to have a strong global position and see recovery in both its long-haul revenue and low-cost flights.

Shares of Air Canada stock are up 48.9% in 2023, and 34.5% in the last three months alone. If this growth continues, it could be a growth stock about to take flight.

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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