Air Canada is trading at pandemic levels, analyst notes

Looking to take a flier on a stock? Consider the beaten down Air Canada (Air Canada Stock Quote, Chart, News, Analysts, Financials TSX:AC).

That’s the opinion of National Bank Financial analyst Cameron Doerksen, who says the stock is looking cheap, even against a trying backdrop.

“In our view, Air Canada’s share price is reflecting an outlook that is more dire than our updated expectations,” the analyst wrote. “The current market cap of $5.0-billion is roughly in line with where the stock traded in summer 2020 during the early months of the pandemic when air travel was effectively shut down, with no near-to-mid-term prospects of any rebound, and Air Canada burning through significant cash reserves.”

As reported by The Globe and Mail, Doerksen April 10 maintained his “Outperform” rating while cutting his price target on AC from $27.00 to $23.00.

“Although we have lowered our 2025 and 2026 forecasts to better reflect the changed market dynamics and softer demand outlook, we still expect Air Canada to be solidly profitable with leverage remaining comfortable at 2.0 times despite significantly higher capex this year and next (nearly $8.0 billion in cash at the end of 2024),” Doerksen addde. “Furthermore, with its diverse network (skewing more international today than in 2008-09), attractive premium product and fully-owned loyalty program (which typically generates solid cash flow even in cyclical downturns), Air Canada is much better positioned for a potential slowdown in air travel demand than in 2008-09 and also versus other Canadian airlines today, in our opinion. Indeed, we suspect that some smaller airlines may struggle if market conditions soften significantly, leading to competitive capacity reductions.”