Should you sell your Air Canada stock?

National Bank Financial Capital Markets analyst Cameron Doerksen has downgraded Air Canada (Air Canada Stock Quote, Chart, News, Analysts, Financials TSX:AC) to “Sector Perform” from “Outperform” in a Sept. 24 report, citing near-term headwinds and “a lack of positive catalysts to drive the stock higher.”

As reported by the Globe and Mail, the analyst also cut his target price to $22.00 from $26.00, compared with the Street average of $25.54, ahead of the carrier’s Nov. 4 third-quarter earnings release.

“Q3 results will be marred by the direct financial impact from the flight attendant strike as well as indirect costs such as passenger compensation and re-booking costs,” he said. “We also expect yield erosion in Q3 and possibly into Q4 due to elevated seat-sale activity post-strike. While a significant financial impact from the strike is expected by the market, we see Q3 results as unlikely to be a positive catalyst for the stock.”

Doerksen lowered his Q3 EBITDA estimate to $913-million from a pre-strike forecast of $1.3-billion.

He also warned of further yield pressure this winter, particularly in the sun markets.

“While overall industry capacity into Q4 looks rational, early indications are that industry sun market capacity this winter will be significantly higher as airlines shift capacity away from U.S. transborder routes,” he said. “Transat management recently noted that its expectation is that industry capacity this winter could be up 10% and historically when there are material capacity increases on these markets, yields come under pressure.”

Beyond earnings, Doerksen flagged structural risks.

“Overall air travel demand in Canada has held in through the summer, despite elevated economic uncertainty and the material decline in Canadian travel to the U.S. However, with consumer confidence in Canada still low and unemployment creeping higher, risks to a slowdown in travel demand and pricing pressure are arguably moving higher.”

He also noted Air Canada has faced labour disruptions in each of the past two years and “likely faces labour-related risk again in 2026 as additional union contracts come up for renewal.”

Despite those concerns, Doerksen highlighted valuation remains attractive on a relative basis.

“Air Canada shares still trade at a sizable discount to its closest peers. On our updated 2026 forecast, Air Canada shares are trading at just 3.3 times EV/EBITDA.”

Based on Doerksen’s updated 2026 forecast, the stock trades at 3.3 times enterprise value to EBITDA, below its pre-pandemic average of 3.9 times and well under the 5.8 times average for U.S. legacy carriers. He values the shares at four times his 2026 EBITDA estimate, which supports his $22 target.

“Although our new target represents a 15% return from the current share price, given the headwinds and lack of catalysts noted above, this return is not overly compelling in our view.”

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