Cargojet is an excellent pandemic play, this investor says

Cashing in on the stay-at-home and remote work trend has been the theme for months now, driving up the share prices for tech names like Amazon and Zoom Video.

And while some investors may have missed out on those gains over the summer, the days and months ahead might still be bright for a name like Cargojet (Cargojet Stock Quote, Chart, News TSX:CJT), says portfolio manager Zach Curry, who says CJT not only fits well in the Canadian e-commerce space but may have fewer of the volatility issues of other companies in the sector.

Cargojet is a huge beneficiary of what’s going on right now with the pandemic,” said Curry, president of Davis Rea Investment Counsel, who spoke about Cargojet on BNN Bloomberg on Thursday. “You’re seeing increased freight, increased online shopping and increased shipping and Cargojet really has a beneficial position in that it aggregates a number of different carriers or shippers to facilitate delivery of products, so it has done very, very well.”

“Unfortunately for us, we do not own it but as the trend towards shipping and more shopping online continues, Cargojet would be a beneficiary for sure. Their contracts are fairly long term in nature, so again, providing some stability. It’s a good company, for sure,” Curry said.

Cargojet’s share price was already doing well before COVID-19 struck, and after a momentary pullback with the rest of the market in February and March, CJT started soaring. So far in 2020, the stock is up 88 per cent and just hit an all-time high of $195 this week.

The overnight delivery company last year signed a blockbuster deal with Amazon to be its shipper over the upcoming seven and a half years while Amazon would inherit a 15 per cent stake in Cargojet. That strategic agreement took away some of the worry that Amazon would out-muscle CJT by building its own logistics network in Canada and it paved the way for Cargojet to keep picking up speed.

The company’s growth has been on display in recent quarters, including its Q2 2020 delivered in August, where the company saw revenue climb 65 per cent year-over-year during the height of the lockdown period across the country. CJT’s adjusted EBITDA ballooned as well, increasing from $37.5 million to $91.1 million.

“Cargojet’s domestic revenues benefited from a strong e-Commerce growth driven by the work-from-home economy that were partially offset by lower B2B volumes, as most non-essential businesses were closed in the early part of the quarter,” the company said in its Q2 2020 press release.

Cargojet said its B2B volumes began to return later in the second quarter, while e-commerce keeps growing.

“The e-Commerce growth continues to accelerate. In addition to large online retailers, thousands of small and medium sized businesses moved their sales to online channels resulting in strong growth in the B2C Business,” Cargojet said.

The success in the stock market is translating into recogntition of another kind for Cargojet management. On Thursday, Cargojet President & CEO Dr. Ajay K. Virmani was named “Strategist of the Year” and one of Canada’s top CEOs by The Globe and Mail’s Report on Business.

“True to his entrepreneurial spirit, Ajay started Cargojet in the thick of 9/11 crisis and in less than 20 years turned it into an air-cargo powerhouse with recognition on the TMX 30 as one of Canada’s top performing stocks two years running. Ajay has been the architect of building Canada’s most efficient overnight air-network that has become the de-facto enabler of next-day e-Commerce. His bold and courageous leadership and relentless focus on employees and customers are at the heart of Cargojet’s success. On behalf of the Cargojet Board, I congratulate Ajay on this remarkable recognition,” said James Crane, Cargojet’s Chair of the Board of Directors said.

Just two weeks ago, Cargojet was recognized as the 10th best performing stock on the 2020 list of TSX30 by the Toronto Stock Exchange.

“We are thrilled to be once again included in this prestigious list that recognizes Canada’s best shareholder value creators. We have always followed a simple principle that the road to shareholder value goes through building a highly engaged workforce that is passionate about looking after our customers,” Virmani said. “We have followed this guiding principle from the day one of our journey and it remains the foundation of everything we do. I would like to extend my sincerest thanks and gratitude to Team Cargojet for all of their efforts, hard work and dedication not only to Cargojet but to Canada during these times.”

“This principle was once again tested as the COVID-19 pandemic hit individuals, families and businesses all around the world. After being declared as an essential service, Cargojet employees have worked tirelessly to keep Canada’s supply chains and the e-Commerce packages moving while bringing millions of Personal Protective Equipment (PPE’s) from around the globe to Canada to help our frontline healthcare workers. Our employees have been on the frontlines and are the real heroes with whom I proudly share this honour.”