I was bearish Air Canada (TSX: AC) It has been in stock for quite some time. I think much of this bearishness is still justified today. That said, there’s definitely a rebound story here. We will dive into a bullish debate in support of why Air Canada’s share price soars in 2021.
Pandemic restrictions may be relaxed sooner than we think
Various lobbying activities are underway in the Travel and Hospitality sector by Air Canada and its peers. This is due to ongoing bailout negotiations between the Government of Canada and airlines.
In my view, the Government of Canada is now a pickle. If travel restrictions remain overly annoying, the amount airlines demand through bailouts will increase. However, if you loosen the restrictions too soon, it can cost you a lot of money. All in all, I think Air Canada will soon benefit from deregulation. I think the reason for this loosening is the vaccines that are currently available. The Government of Canada has “outs” to carefully relax restrictions, save the sector, and avoid large bailout payments that may not be popular among voters.
Cargo volume may get over the company
As pointed out by fellow fool contributors Sneha Nahata Recent works, Cargo volume is an important factor that many investors are overlooking. The ability to make money by transporting non-humans, leveraging Air Canada’s existing capabilities, mitigates the pandemic-related blows this airline has faced.
With the surge in demand for e-commerce, Air Canada can actually gain traction in areas that the company is not normally focused on. For long-term investors, this is bullish. The better any company can bring more sources of income. As Air Canada strengthens its freight business, the amount of cash the airline is burning could decline over time. Of course, reducing capacity also helps.
I think we will see relief in 2021. In addition, we expect travel restrictions to be relaxed shortly. These two key factors, combined with Air Canada’s operational cost savings measures, could be sufficient to bankrupt this recovery inventory in the coming quarter.
Air Canada has some of the best indicators of its North American peers and has been my worthy choice in the past. Picking up stock in such a company with weakness is always attractive. That said, TSX is filled with a lack of lasting value picks that remain cheap. Investors trying to time the rise in Air Canada stocks may see retracements if these catalysts don’t happen. Therefore, this is a stock that I recommend only to long-term investors who are currently looking for value.
There are some other great strains that are likely to outperform in 2021.
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Stupid contributor Chris Macdonald There are no positions in any of the listed stocks.
Why Air Canada shares soar in 2021
https://www.fool.ca/2021/01/09/why-air-canada-stock-could-soar-in-2021/ Why Air Canada shares soar in 2021