Air Canada (TSX:AC): 4 Reasons to Buy the Stock Today

Air Canada (TSX:AC) stock has surged in November, and I’m still very bullish on its shares, as we look ahead to the rest of the 2020s.

| More on:

Air Canada (TSX:AC) stock has climbed 39% month over month as of close on November 25. Airliners across North America have seen their shares gather momentum in November. Today, I want to look at four reasons Canadians should look to pick up their top airliner before we move into the final month of the year.

Air Canada is in much better shape than it was a decade ago

Earlier this month, I’d discussed Air Canada’s sudden surge. One of the reasons I was bullish on the stock was its position in comparison to the early 2010s. The COVID-19 pandemic may be the most significant global event in the 21st century, but the 2007-2008 financial crisis also shook the world to its core. In the years that followed, the future of Air Canada was not assured.

A questionable balance sheet had many investors expecting a downfall for Canada’s top airliner. The stock even fell below the $1 mark in the early part of the last decade. However, on the back of a broader recovery and improved leadership, the company clawed its way back to one of the top performers on the TSX. It entered 2020 with a much stronger balance sheet and overall business in comparison to the early 2010s.

The vaccine is coming quickly

The big spark for Air Canada and its peers was the news that Pfizer threw out in the aftermath of the U.S. presidential election. Its data showed a vaccine candidate that was 90% effective. More companies have entered their data into the fold. Moderna released data on a vaccine candidate that demonstrated 94% effectiveness. The market erupted on this news, especially in sectors that had been punished by the pandemic.

Air Canada originally expected that it would take between two and three years to bounce back after this monumental crisis. However, if a vaccine can be effectively rolled out by early 2021, that comeback may arrive much sooner.

Desire to travel has not died with the pandemic

COVID-19 restrictions on airliners have made air travel itself a very unpleasant experience. Even those who want to travel in this uncertain time are unlikely to follow through in this environment. However, the desire to travel is still there. When travel becomes “safe enough” once again, I expect to see an explosion of travel. In the United States, roughly 50 million Americans have continued to travel for Thanksgiving.

Many Canadians are also sitting on big COVID-19 savings. Travel budgets will be full to bursting when things clear up in 2021. A recent study from the CIBC showed that Canadian households and businesses were holding on to more than $170 billion in excess cash. Savings rates have increased to 13.6% compared to 3.6% before the pandemic. More cash is certain to equal more travel when restrictions are lifted. That is very good news for Air Canada.

Air Canada still has huge growth potential

That last point leads into Air Canada’s growth potential over the course of the 2020s. A $2,000 investment in Air Canada on January 1, 2010, would have been worth over $73,000 as at December 31, 2019. Shares of Air Canada are trading near the bottom of its 52-week range right now. Air travel is a good bet to pick up where it left off in the years following this pandemic. Air Canada is a dominant force in this space and well worth betting on today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

More on Investing

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

stock research, analyze data
Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

There are opportunities and risks on the horizon for the Canadian banks.

Read more »

Young Boy with Jet Pack Dreams of Flying
Stock Market

Is Air Canada Stock a Good Buy After Its Q3 Results

Down almost 60% from all-time highs, Air Canada is an undervalued TSX stock that remains an enticing investment in November…

Read more »

cloud computing
Investing

Where to Invest $10,000 in November

Given their solid underlying businesses and healthy growth prospects, I expect these two defensive stocks to outperform uncertain outlook.

Read more »

coins jump into piggy bank
Retirement

Here’s the Average RRSP Balance at Age 44 for Canadians

Holding stocks like Alimentation Couche-Tard (TSX:ATD) in an RRSP is a good way to build your wealth.

Read more »

dividends can compound over time
Dividend Stocks

Want a 7% Yield? The 3 TSX Stocks to Buy Today

These TSX stocks are offering high yields of over 7%, making them attractive for investors seeking steady passive income.

Read more »