Chorus Aviation (Chorus Aviation Stock Quote, Chart: TSX:CHR) may have had a horrible year so far but the stock could see a turnaround coming up, says Jon Vialoux, Associate Portfolio Manager with CastleMoore Investment, who points to CHR’s seasonality over the next few months.
’Tis the season to be booking your trip on Chorus, says Vialoux, who spoke to BNN Bloomberg about the Halifax-based regional and charter airline, saying that if the stock can hold support at its current price there may be a trend reversal in the cards.
“We’ve had a bit of a downturn,” says Vialoux. “It’s producing lower lows and lower highs and it’s resisting at the 200-day moving average, so we’re seeing this trend which is not exactly favourable for the seasonal setup but we are showing signs that momentum is improving here.”
“You could argue a trend channel [over 2018] and we’re just kind of holding in the middle of that trend channel right now, so if we can see some of that stability coming into this period ahead, I would think it would be an opportune time to buy,” he says.
Between mid-2013 and January of this year, the stock climbed over 400 per cent, but it’s been all downhill for 2018, punctuated by a substantial drop in response to CHR’s latest quarterly earnings.
Delivered on November 14, the third quarter results missed analysts’ top line consensus estimate, producing operating revenue of $366.7 million, down from $343.7 million last Q3 and lower than the expected $373.4 million. The company generated net income of $43.7 million, significantly lower than last year’s $79.3 million but beating the Street’s $38.9 million.
The stock has lost more than ten per cent since the Q3 release and now sits off 32 per cent for the year. Still, investors may be intrigued by CHR’s healthy dividend yield, which is currently at 7.43 per cent.
Vialoux points out that the stock is entering its seasonally strong months.
“The optimal period to hold Chorus Aviation is between November 18 and February 23 and it has produced a geometric average return above the benchmark rate of 10.43 per cent and it has been positive in ten of the past 11 periods,” says Vialoux.
“I want to see a hold support here [at $6.50],” he says. “If we can hold support then you will have a positive momentum divergence compared to price, which would entail that selling pressure has abated. But for now, lower lows, lower highs, I would stay away.”