WestJet could have 30% upside, Brian Acker says

WestJet’s (TSX:WJA) share price may be on a steep nosedive so far in 2018, but investors could still make out very well if they can time their reentry right, says investment manager Brian Acker of Acker Finley.

Ahead of its Q2 earnings report on July 31, investors are looking for some good news from Canada’s second-largest air carrier, which has had a rough go of it over the past six months. Dogged by labour disputes, management shakeups and now attempting to roll out its ultra low-cost carrier, Swoop, WJA is down 23 per cent from late February, closing on Tuesday at $18.13.

Buying opportunity? Maybe soon, says Acker, who pinpoints a little under $15.00 as a potential support level.

“I like it on an earnings basis; however, it certainly has been going down,” Acker told BNN Bloomberg Tuesday. “I would take probably a half-position, but certainly if you were to have a negative transit here. It looks like it wants to go lower. I would sell it and I would look for a lower level here at $14.87.”

In May, WestJet’s first quarter financials showed an EPS of $0.32 per share on a profit of $37.2 million, down from $0.40 per share on earnings of $46.7 million for Q1 of 2017. At the time, management warned that the airline’s revenue per available seat mile would likely be either flat or down two per cent over the second quarter.

Last week, the Canadian Union of Public Employees (CUPE) announced it was filing an application to represent WestJet’s flight attendants, the majority of whom have reportedly now signed union cards.

“[There’s] a lot of news about WestJet,” says Acker. “Obviously, the [rising fuel costs] but also at the same time, they’re unionizing pilots and the [flight attendants]. The market doesn’t really like that, but there’s certainly a lot of upside.”

“If there was a positive good news catalyst for this stock, I think there’s an easy 25-30 per cent. But you’re going to have to have a little bit of a campaign and trade around our EBV lines in order to make money,” says Acker.