It may not look it but Air Canada (Air Canada Stock Quote, Chart, News TSX:AC) is a stock to own for a COVID-19 recovery, says Stan Wong of Scotia Wealth Management, who says the stock is just one good vaccine away from shooting up the charts.
The air travel sector has been decimated by the pandemic and associated lockdowns and restrictions, with Air Canada being no exception. The company lost $1.75 billion in its most recent quarter as revenue fell by 89 per cent to $527 million for its second quarter ended June 30.
The company said it carried less than four per cent of the passengers it had during last year’s Q2, with president and CEO Calin Rovinescu calling the combined impact of COVID-19 and Canada’s federal and inter-provincial restrictions “devastating and unprecedented.”
The pandemic has done a number on Air Canada’s share price which like the other airlines has refused to gain back much of the ground lost in the general market pullback of February and March. At its worst, AC went from $52 per share early in the year to as low as $12, with the stock trading in the $15 to $20 range in recent months.
But investors should be thinking about dipping a toe in this stock, says Wong, director of wealth management at Scotia Wealth, who spoke on BNN Bloomberg on Wednesday.
“I still like Air Canada and we still hold in the portfolio,” Wong said. “I think in the travel leisure airline space we have to be very patient with this. If you look at the share since March, whether it be Air Canada or the cruise lines or the other airlines in the States or the casino companies, they are slowly moving forward and they started to move higher.”
“With Air Canada in particular, they've got lots of liquidity in place to keep it going. When you look at what's happening and we look 12 to 18 months out, I think more people will be in the air and more people will be flying. We'll start with more domestic flights and then it's going to go more to the US and International,” he said. Wong said the key will likely be the emergence of an effective vaccine against COVID-19.
“When I look at the airlines I think it's just a patient type of story. With all the positives coming out in terms of possible vaccine and therapies and the fact that the curves are moving down in, particularly in Canada and even in the United States, I think if we’re patient with a company like Air Canada we’ll be fine and we'll make money on it.”
Air Canada had unrestricted liquidity of a whopping $9.120 billion as of late last month, giving the company lots of time and space to get back on firmer footing. At the same time, credit rating agency Fitch downgraded Air Canada from BB to BB negative, with Fitch saying the airline will see a slower than expected recovery in 2021.