Shares of Air Canada (TSX: AC) have been on the ascent this month, gaining close to 33% in the past month alone on the back of a somewhat decent quarterly earnings report. Indeed, the first quarter was by no means incredible, but it was good enough to win over some notable analyst price target upgrades. And while Air Canada certainly isn’t out of the woods yet, the company does seem to have the means to keep moving higher as it becomes that much better at managing operations through tougher economic climates.
In any case, those who’ve been standing on the sidelines may have reason to start boarding again as management continues to do its best to get capacity back to levels not seen since before the pandemic began around five years ago. Indeed, the pandemic hit Air Canada a heck of a lot harder than most other airlines, especially those south of the border. And while 2025 seems to be another sluggish year for demand, I do think that expectations may be a tad too conservative for an airline that’s come a long way since managing through the early days of the COVID crisis.
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Air Canada stock may finally be in a spot to break out.
At the time of this writing, shares of Air Canada are going for $18 and change per share, a level that it has hovered around for many years now. And while even the top airline stocks could prove turbulent plays as the Canadian economy feels a bit of headwinds from tariffs (fewer Canadians flying south of the border of late), I’d not be surprised if things normalize sooner than expected as the odds of a U.S.-Canada trade deal look to improve under PM Mark Carney’s leadership.
For now, it’s all about how management can manage costs as demand looks to fluctuate wildly in response to more macro disruptions. At some point down the line, I do think “pent-up demand” for travel could be met once there’s more clarity on the future of trade between Canada and the U.S. With many big-name analysts looking for AC shares to surge past $20, the latest melt-up in the name certainly looks tempting for those deep-value investors who’ve been waiting patiently for their turn to begin boarding.
It’s hard to believe, but the stock is still down over 63% from its 2020 all-time highs. Undoubtedly, AC shares have really struggled to get off the tarmac in the past five years.
With National Bank analyst Cameron Doerkson hiking his AC stock price target by a dollar to $24.00 per share, citing his belief that a “downturn in air travel demand” has already been priced in, I’m inclined to average into the stock on strength as others investors look to take a profit with the assumption AC’s rally will falter, like it has so many times in the past five years.
Bottom line
Of course, it’s hard to tell if things will be different this time around, as the stock looks to break past a hefty ceiling of resistance. In any case, the latest better-than-feared Q1 result may very well just be the start of a sustained move higher. The company is buying back its own stock (announcement of a $500 million repurchase plan), likely because it’s ridiculously undervalued at this juncture. Sure, challenges lie ahead as tariffs complicate matters further. Either way, one has to think that the firm now has what it takes to navigate through periods of turbulence better than ever before.
