The air travel industry is one that’s been difficult to assess over the past year. Airlines such as Air Canada (TSX:AC) have traded in a relatively narrow band over the past year, with AC stock currently trading around the midpoint of this band. The question many investors have is: where is this stock headed from here?
With tourism stocks seeing some decent momentum of late, let’s dive into whether Air Canada is a buy in September or if investors are better off waiting on the sidelines.
How are the numbers looking for Air Canada?
With a loss of $1.7 billion for the most recent financial year and a loss of $722 million over the previous 12 months, the $7.8 billion market-cap company has reduced its deficit by getting closer to its goal of profitability.
Analysts expect the company to grow 18% yearly on average and make a profit of $1.2 billion in 2023. That’s good and a step in the right direction. Notably, Air Canada reported operating earnings of $4.9 billion during the 1st quarter ending on March 31, 2023, which represents an increase of 89.9% year over year. Its adjusted earnings before interest, taxes, depreciation, and amortization also came in at $411 million, alongside net income of $4 million compared to a loss of $974 million during the same period last year. These are all positives, and the company is clearly headed in the right direction.
By this year’s end, analysts are predicting that Air Canada’s revenue will increase by 29.2% to $15.87 billion. In the same period, it’s expected to report earnings per share of $1.87. The share price has risen 25.6% over the last nine months in anticipation of stronger numbers down the road.
Bottom line
Air Canada is the largest airline in Canada and remains one of the top ways Canadians can play the travel rebound trade. Notably, Air Canada has shown significant improvement since the economy started to recover. However, it will need some time to get back with bombastic returns for its investors, like old times.
While patient investors can certainly do well holding this stock over the long term, I’m uncertain about the near- to medium-term outlook for this stock. Thus, I’ll be watching Air Canada from the sidelines and see if the company can meet analyst expectations before diving in.
