Is Air Canada stock a bargain or a bust?

Is Air Canada (Air Canada Stock Quote, Chart, News TSX:AC) a bargain here?

It’s probably one of the most intriguing stocks out there. Air Canada, a company roundly praised for its successful turnaround over the past half-decade and an investor’s dream to own over that same period.

And while the stock may have been flying too high in the $50 per share range back before the market tanked in February and March, today’s sub-$20 territory must surely be too low, right?

That’s yet to be determined, says portfolio manager Bryden Teich of Avenue Investment, who worries about the health of the airline industry going forward.

“The question I would ask (about Air Canada stock) is how long will it take before you're comfortable going on a plane ride to Europe or to the Caribbean or Asia?”

“It’s a stock that we’ve owned in the past. We owned it about a year and a half ago when it was it was just coming through its restructuring and all of the growth,” said Teich, in conversation with BNN Bloomberg on Wednesday.

“In meetings with management or presentations I’ve listened to, for years Air Canada had been talking about how great a balance sheet they had, how much cash they had, and really how great a job they’ve done paying down their debt,” Teich says. “But then in the current scenario where capacity got cut, you know, 80 or 90 per cent, and the fixed costs of the business are still largely there, you still had an environment where it was going to be very difficult for the airline.”

Teich said that as the country’s largest airline, AC won’t be left dangling by the federal government who will likely be providing significant financial support for a company seen as critically important to the country as a whole.

At the same time, a struggling economy and a general unease with travel should both be seen as red flags to investors, says Teich, despite the stock’s rock-bottom price.

“The question I would ask is how long will it take before you’re comfortable going on a plane ride to Europe or to the Caribbean or Asia?” Teich said. “I think as a business it’s probably going to be challenged for a while.”

“It’s a great company and I think on the other side of this the shares will perform very, very well, but it’s just a very difficult environment to be owning the airlines right now,” Teich said.

Air Canada announced this week that it would be suspending service to the United States as part of restrictions put in place by both Canada and the US against cross-border travel during the time of COVID-19. AC said its last commercial flight between the two countries would be on April 26, with resumption of flights at least for now pinned on May 22, a date which may be extending if the federal government ends up extending its travel restrictions.

Air Canada last reported earnings in mid-February where the grounding of its fleet of 737 Max 8 for much of 2019 had taken its toll on the company, even as it posted revenue climbing five per cent to $4.43 billion for its fourth quarter. Air Canada recorded adjusted net income of $47 million, down from $55 million a year earlier.