Can Cargojet Stock Double in 5 Years? Here’s What it Would Take

Cargojet (TSX:CJT) stock has fallen dramatically in the last five years after climbing to all-time highs. So, what can it do to get back there?

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Shares of Cargojet (TSX:CJT) stock are a fraction of what they were just a few years ago. While it hasn’t been hit as hard as potentially some other pandemic stocks, Cargojet stock has certainly shrunk from all-time highs of $222 per share. It now trades at $113, down a whopping 96% since that time.

But if it’s reached those heights before, could it do it again? Today, let’s look at what’s been happening with Cargojet stock. And furthermore, what it would take for the company to potentially double in the next five years.

What happened?

During Cargojet stock’s most recent earnings report, the cargo airliner swung into a loss following a number of issues. Consumer demand has continued to fall since the surge during the COVID-19 pandemic. Rising inflation hurt this as well, driving up costs for both consumers and Cargojet stock in the process. This has squeezed margins even tighter for the company.

What’s more, other airlines in Canada have also seen an increase in their air cargo business. So, this has hurt the stock further, with more competition on the line. But perhaps the worse news, which sent shares dropping up to 4% after earnings, was the cancellation of its fleet expansion plans.

Now, overall, this was to strengthen the stock’s bottom line. The company needed cash during these trying times, so it was fiscally responsible to keep cash on hand. However, it shows that the business certainly is struggling. It also cancelled its Boeing 777 aircraft intended for international flights.

What needs to happen now?

There are a few things that Cargojet stock needs to do if it hopes to double in five years. First, it needs to take on a few primary issues to help the company get back on its feet. And, of course, this comes down to reducing costs and creating cash.

First off, Cargojet stock needs to optimize its fleet utilization that it already has. This would mean maximizing flight hours and minimizing downtime. Optimizing this would also involve efficient scheduling, route planning, and maintenance strategies.

Furthermore, the company needs to reduce operational costs. So, it should negotiate better deals — not just with labourers but suppliers and other operational expenses. This could also be an area where the company could identify areas to streamline operations and even eliminate unnecessary costs. Honestly, this is why I like the move to cancel its new fleet.

What needs to happen later?

Once the company has more cash on the books, it will be time to start differentiating itself from competitors. Luckily, airlines in Canada have already cut back on their cargo businesses. However, that could change in the future. So, Cargojet stock will have to find a way to make it look unique compared to these other companies.

This could be achieved through strengthening customer relationships with existing domestic and international customers. Furthermore, there are opportunities to expand more in Canada, where it holds a dominant presence. From there, the company should continue to monitor market trends. How can it use artificial intelligence to help streamline its process? What can it get on the market before others? All this could help the company expand further.

Bottom line

Overall, Cargojet stock is a strong company and is the only overnight cargo airline in Canada. This is of huge benefit, especially when the economy gets back on its feet. Meanwhile, the company needs to identify where it can use technology, automation, tracking, and even drone delivery to expand and make it stand out from the rest. Plus, identify ways of strengthening its relationships with recurring customers to help investors see that revenue won’t decline in the future. Should this be achieved in the next few years, Cargojet stock certainly could double in share price 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.

Fool contributor Amy Legate-Wolfe has positions in Cargojet. The Motley Fool has positions in and recommends Cargojet. The Motley Fool has a disclosure policy.

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