Air Canada (TSX: AC) is one of those stocks that consistently catches the eyes of investors. It’s an exciting stock that can rally quickly, but ever since the pandemic, it has struggled to sustain those gains.
A big part of why is the huge debt load the airline had to take on and is still paying down. So, although the stock has come a long way off its post-pandemic lows, it’s still trading at a valuation that suggests investors remain skeptical about how sustainable the recovery really is.
Air Canada is also heavily influenced by macroeconomic factors. Travel continues to grow in popularity, but discretionary spending, inflation, and interest rates all impact revenue and costs, creating both opportunities and risks for the business.
That’s what makes 2026 particularly interesting. The business is clearly improving operationally, the macroeconomic environment is easing, margins are expected to recover, and travel demand remains steady. Yet the stock is still priced as if expectations are relatively low.
So, if you’re wondering whether Air Canada stock is worth buying in 2026, it comes down to two things: how the business itself is performing and whether the current valuation already prices in most of the risk.
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Air Canada’s profitability could see a meaningful improvement in 2026
From a business standpoint, Air Canada enters 2026 in a much stronger position than it was just a few years ago. Travel demand has normalized, capacity discipline has improved, and management has been far more focused on profitability instead of just chasing volume.
Furthermore, with macroeconomic pressures easing, like inflation stabilizing and interest rates starting to come down, Air Canada should get more breathing room, which should naturally help margins improve and profitability increase.
International travel continues to be a key driver of its margin improvement as well. Long-haul and international routes tend to be higher margin, and Air Canada’s global network gives it a real advantage compared to smaller regional carriers.
Another underappreciated factor is how much more disciplined airlines have become post-pandemic. Capacity expansion is more measured, pricing is more rational, and airlines are far less willing to destroy margins just to gain market share. That helps benefit dominant players like Air Canada more than anyone else.
Is Air Canada stock undervalued?
Where Air Canada really gets interesting is its current valuation. With the stock trading at $19.59 at the time of writing, it is trading at just 8.4 times forward earnings and roughly 3.1 times enterprise value (EV)-to-earnings before interest, taxes, depreciation, and amortization (EBITDA). These are reasonable valuations historically for Air Canada, particularly post-pandemic.
Furthermore, analysts currently have an average target price of $23.23, which implies just under 20% upside from today’s price. That’s not a huge forecast, but it suggests there’s still room for the stock to move higher if execution continues.
Plus, with revenue, EBITDA, and normalized earnings per share (EPS) all expected to grow significantly in the coming years, the stock could have more potential on the horizon.
For example, analysts forecast revenue growth of roughly 7.2% in 2026 and 6.9% in 2027. In addition, EBITDA is expected to jump 15.8% in 2026 and 10.6% in 2027 as margins improve with stabilizing inflation. Meanwhile, its normalized EPS are estimated by analysts to jump roughly 81% in 2026, followed by another 30% in 2027.
Therefore, while Air Canada isn’t necessarily super cheap in this environment and while there are still some risks persisting, it certainly has the potential to see a significant recovery this year and a potential rally, especially if the microeconomic environment continues to improve and Air Canada can execute on its recovery.
