We’re buying Air Canada stock, this portfolio manager says

Air Canada (Air Canada Stock Quote, Charts, News, Analysts, Financials TSX:AC) stock has been gaining altitude for the past half-year, with a noticeable bump in recent weeks. But the stock remains well off its pre-pandemic highs, even as the airline industry has been levelling up. What an investor to do? Buy it, says portfolio manager Jamie Murray, who thinks business will continue to pick up in 2023 for Canada’s largest airline.

“There’s an opportunity with Air Canada and it’s still a name that we own,” said Murray, head of research at the Murray Wealth Group, who spoke on BNN Bloomberg on Wednesday.

“We’ve actually been buying more over the last 12 months, as the stock sold off from the mid-$20s last year until the mid to high teens in the summer when they had to cut their capacity back to manage the the available supply at the different airports,” he said. “But those issues seem like they’re moving into the past and travel demand is still very, very strong.”

Murray said the US airlines are reporting strong growth numbers, which should be a good sign for Air Canada. Travel restrictions within Canada over the COVID lockdowns were tougher than those in the US, and so if there’s been growth in the US that would potentially indicate even stronger relative growth coming up for Canada’s airlines.

American Airlines just reported fourth quarter earnings that beat analysts estimates and featured revenue up almost 17 per cent from a year earlier. Higher fare prices were indicated as one reason for the topline increase. For the full 2022 year, the airline’s revenue grew by 64 per cent, while earnings returned to the black at adjusted EPS of $1.14 per share compared to a loss of $1.44 per share a year earlier.

For Air Canada, its latest reported quarter saw revenue double for the third quarter 2022 compared to a year earlier, while its net loss was moderately better, as well.

Murray said another factor in Air Canada’s favour is the return of the Chinese economy with the reopening of businesses there from over two years of lockdowns. 

“China is actually the second-largest inbound source of air travel [for Canada] outside of North America, so that’s going to add more fuel to the fire for Air Canada,” Murray said.

“We still think that Air Canada is going to have another good 12 months ahead of it,” he said.