Air Canada (TSX:AC) stock has started 2024 on a slightly positive note by rising 4% in January so far to currently trade at $19.43 per share, taking its market capitalization to $7 billion. After weathering the turbulence for four consecutive years, AC stock has the potential to stage a handsome recovery this year, making it among the top Canadian stocks to consider right now.
In this article, I’ll talk about three key reasons why Air Canada stock stands out in 2024. From its financial recovery post-pandemic to strengthening the global travel industry, I’ll try to give you a brief overview of why Air Canada could be a valuable addition to your long-term investment portfolio. Let’s begin.
Air Canada’s robust post-pandemic financial recovery
The first reason to consider investing in Air Canada is its impressive financial recovery following the global pandemic. The pandemic’s onset saw a drastic downturn in travel demand, leading to big financial challenges for the aviation industry in 2020. New variants of the pandemic and extended restrictions on air travel continued to affect air travel demand in the following years.
However, as we move into 2024, Air Canada’s story has taken a remarkable turn. To give you a little idea about that, the airline company’s total revenue stood at $16.7 billion in the first three quarters of 2023, reflecting an outstanding 40.3% year-over-year increase. For these nine months, the Canadian flag carrier reported $4.73 per share in adjusted earnings against its adjusted net loss of $2.46 per share during the same period of the previous year.
Air Canada’s net profit for the first three quarters of 2023 has surpassed its profits from the pre-pandemic year of 2019. The company achieved $3.37 per share in adjusted annual earnings in 2019, backed by $19.1 billion in revenue. Comparing Air Canada’s full-year 2019 earnings to its earnings in just three quarters of 2023 gives us a good idea about its strong financial recovery post-pandemic.
Air travel demand is expected to strengthen
Another strong reason to invest in Air Canada in 2024 is the expected increase in the demand for air travel. After the world returned to normalcy, the demand for both leisure and business travel surged sharply in 2023.
Central banks in both the United States and Canada are expected to slash interest rates in 2024. This anticipated reduction in interest rates could play a crucial role in stimulating various sectors of the economy, including travel and hospitality. Lower interest rates typically lead to increased consumer and business spending due mainly to lower borrowing costs. For Air Canada, this could translate into a surge in both domestic and international flight bookings. Leisure travel is also likely to see an uptick as individuals take advantage of their increased purchasing power.
Air Canada stock still looks undervalued
Finally, after falling for four consecutive years and losing 61.5% of its value between 2020 and 2023, Air Canada stock looks way too undervalued in 2024, especially based on its long-term growth outlook.
In my opinion, AC stock’s current market price, weighed down by its past struggle, does not fully reflect the airline company’s recovery trajectory and future growth potential, making it even more attractive to buy in 2024 and hold for the long term.
