Should Cargojet shareholders hold onto the stock?

Despite ongoing weakness in freight demand, Cargojet (Cargojet Stock Quote, Chart, News, Analysts, Financials TSXV:CJT) is managing the environment well, according to Paradigm Capital analyst Razi Hasan, who maintained a “Buy” rating and lowered his price target to $139 from $145 in a July 16 report. He noted some near-term pressure in the ACMI and Charter segments but pointed to the company’s leadership in Canada’s domestic network and flexible capital strategy.

Cargojet is a Canadian company that provides overnight air cargo services using its own fleet of aircraft. It also offers crew, maintenance, and insurance for cargo and charter flights.

“The company has long-term minimum agreements in place with DHL and is paid a fixed amount to operate each flight, priced as a rate per block hour,” Hasan said. “In Q1/25, the segment experienced a decline of 16.5% y/y in revenue owing to shorter routes flown in the quarter related to economic uncertainty stemming from tariff concerns. We expect this softness to continue in the near term and forecast ACMI growth to decrease 21.9% y/y in Q2. We note CJT continues to fly the same number of aircraft; as such, we expect the segment to recover to longer routes as sentiment improves.”

Cargojet is set to report its second-quarter 2025 earnings on August 6 after markets close. Paradigm Capital has updated its forecasts, expecting continued weakness in the ACMI segment and slower growth in charter services, but ongoing strength in the company’s domestic network. Hasan projects Q2 revenue of $241.5-million, up 4.6% from last year, and Adjusted EBITDA of $78.5-million.

Cargojet’s domestic network handles shipping across Canada through long-term take-or-pay agreements with major customers. While year-over-year growth won’t match Q1’s 16.4% jump, Hasan still expects a 7.5% increase in Q2, driven by solid e-commerce demand.

“Encouragingly, the company recently announced it has extended its Air Transportation Services Agreement with Amazon Canada Fulfillment Services, ULC for an additional four years (until March 31, 2029), with Amazon having an option to renew the contract for an additional two years (until March 31, 2031),” Hasan said. “We view the extension as evidence of the strategic partnership between the two companies and would expect the announcement to alleviate investor concerns surrounding the potential loss of a top-tier customer.”

Hasan estimates that the company will generate $328.8-million in Adjusted EBITDA on $994.0-million in revenue for fiscal 2025, down from his previous forecast of $351.6-million in EBITDA and $1.07-billion in revenue. For fiscal 2026, he expects results to improve to $359.9-million in EBITDA on $1.08-billion in revenue, compared to earlier estimates of $376.3-million and $1.14-billion, respectively.

“We have extended our forecast period to 2026 and apply an 8.0x EV/EBITDA multiple to arrive at our new target price of $139.00 (was $145.00),” he said. “While we view the long-term set-up as supportive for Cargojet shares, we believe the recent strength in the share price coupled with the noise surrounding a softening freight environment related to tariff uncertainty could create a tougher backdrop for the shares in the short term. Cargojet currently trades at 6.8x NTM EV/EBITDA.”

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