Analysts

Air Canada, Bombardier or CAE. Which is the best investment for 2025?

The sector faces pressures, but there is money to be made in airline industry if you know where to look.

That’s the opinion of RBC Dominion Securities analyst James McGarragle, who sees a tougher environment for the space as we enter 2025. The analyst says investors should not expect a repeat of 2024.

“Share prices generally outperformed in Q4,” McGarragle wrote. “Canadian Airlines & Aerospace share prices generally outperformed the index during the quarter with the exception of BBD, (down down 5 per cent) as continued supply chain issues impacted margins in Q3 adding risk in our view to 2025 FCF guidance. CAE’s performance was driven by strong defence margin growth in FQ2, the SIMCOM acquisition, and the announcement of a new CEO. AC’s shares were up meaningfully (off lows) on strong Q3 results and the increased 2024 guide driven by fuel and a one-time contract-related adjustment. However, shares gave back some gains after the company’s Investor Day which highlighted a tough 2025 set-up. Finally, both EIF and CHR outperformed, with EIF putting up a strong 2025 guide with continued momentum in Windows orders and CHR highlighting lease extensions locking in future lease revenues.”

The analyst says Bombardier (Bombardier Stock Quote, Chart, News, Analysts, Financials TSX:BBD.B) is his top pick in the airline sector and, as reported by the Globe and Mail, he reiterated his “Outperform” rating on it January 15 while trimming his price target from $133.00 to $130.00.

McGarragle raised his price target on CAE (CAE Stock Quote, Chart, News, Analysts, Financials TSX:CAE) from $34.00 to $38.00, while maintaining the same “Outperform” rating on it.

And the analyst maintained his “Sector Perform” rating and $23.00 price target on Air Canada (Air Canada Stock Quote, Chart, News, Analysts, Financials TSX:AC).

“AC is trading at the low end of its historical average as the industry grapples with normalizing demand, yield pressure, higher costs, and capacity risk. Bombardier is also trading below its historical average, as well as at a meaningful discount to peers, and remains our top idea on the back of a meaningful FCF inflection in 2025, in addition to longer-term opportunities in services and defense. CAE is trading near the midpoint of its historical range after a re-rating in Q4. Similarly, EIF is trading in line with its historical average, while CHR’s valuation topped its historical 5-yr. range following the RAL sale which closed in Q4,” he added.

Tagged with: acbbd.bcae
Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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