Business & Investment

Air Canada: Are You Buying This TSX Stock Today?

Air Canada (TSX: AC) Inventories fell almost 4% last week. The company plans to announce earnings this week, raising questions for potential investors-should I stay or go? In other words, the Clash causes problems when I stay. If I go, it can cost twice as much.

why?Because Air Canada Continue to remain I am in an unstable position now. Travel has fallen off cliffs, both for business and leisure. Canadians are vaccinated, but that’s not the ideal rate. Vaccine deployment has been sluggish for the past two months and has just begun to speed up.In Canada List of people A person who can enter the border. There are no businessmen or tourists among them. Flights from India and Pakistan are banned until May 31st.

Still, stocks continue to attract eyeballs. Air Canada is considered a stock that will expand once the pandemic restrictions are lifted. Unfortunately, no one has a clear answer as to when it will be. Remember that the stock was trading for over $ 50 just four months before the pandemic hit the world.

Fitch downgrades Air Canada’s credit rating

Rating agency Fitch downgraded Air Canada’s credit rating from BB- to B + in early April, consistently negative. Fitch said: “The recovery in air traffic, especially the slow pace of international travel, is putting pressure on Air Canada’s balance sheet, making it difficult to achieve credit indicators that support the“ BB- ”rating by 2023. Equivalent to 1.0 turns of EBITDAR in 2020 and 2019. “

Rating agencies say Air Canada’s Cashburn could follow 2021 and 2022. This means that airlines have a leverage ratio of over 5 and may have a high rating for the “BB” category.

What has changed between those days and now? There is nothing but a travel ban. However, it is here that Air Canada will be hit, as cross-border and international travel dominates the business. Fitch explains: “AC has reduced capacity in the first quarter of 2009 by about 85% from the level in the first quarter of 2019, and by the end of 2021, it is at least 50% below the level in 2019. Throughout the year.”

Where do AC stocks go from here?

Air Canada is still in the recovery stage. Very optimistic investors believe the company will be able to regain its pre-pandemic valuation of $ 50 per share in the next 12 months, but ignore the prospect of a third wave of global infections. doing.

Air Canada has made a wise move in offering refunds. The company has already paid $ 1.2 billion since February 2021. This number will be even higher with new refund offers. However, Air Canada received a $ 5.9 billion bailout. One of the main reasons for bailout was Air Canada refunding customers. Refunds are a small trade-off and can be a very wise business decision.

AC shares closed at $ 24.77 on April 30, and analysts gave it a 12-month average price target of $ 28.26, an increase of more than 14% from current levels. Holding shares is not the worst idea. Air Canada should rise as the world begins to accelerate vaccine deployment.

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This article represents the opinion of a writer who may disagree with the “official” recommendation position of the Motley Fool Premium Services or Advisors. We are Motley! Asking investment treatises, even our own treatises, can help you think critically about your investment and make decisions to be smarter, happier, and richer. As a result, we may publish articles that may not match recommendations, rankings, or other content. ..

A stupid contributor, Aditya Raghunath, does not have a position in any of the shares mentioned.

Air Canada: Are You Buying This TSX Stock Today? Air Canada: Are You Buying This TSX Stock Today?

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