This year could be a year of discovery for value investors after growth stocks prevailed in 2023. Many stocks are trading at discounted prices or below their intrinsic values to start 2024. However, if inflation continues to recede and interest rates drop, they could take the lead this time.
If you have $5,000 to invest, Air Canada (TSX:AC), Bombardier (TSX:BBD.B), and Lightspeed Commerce (TSX:LSPD) are ripe for the picking for long-term investors.
No major slowdown
Air Canada was among the top 30 TSX growth stocks in 2019 (ranked seventh). The $6.5 billion airline company had 27 consecutive quarters of revenue growth and profit before the global pandemic in 2020. Government-mandated lockdowns and unprecedented travel restrictions inflicted financial damage to the airline industry.
Fortunately, fast forward to the present and management notes the relatively strong demand in almost every single geography where Air Canada operates. In Q3 2023, the adjusted profit jumped 192% to $1.3 billion versus Q3 2022. “We’re not seeing any major slowdown at this point in time,” said Mark Galardo, Air Canada’s executive vice president of network planning and revenue management.
At $18.21 per share, AC is down 2.6% year to date. National Bank analyst Cameron Doerksen, a research analyst at National Bank of Canada said the share price reflects an overly pessimistic view of the current air travel market and the company’s long-term prospects. Moody’s Investors Service also predicts robust travel demand despite a potentially slower global economy.
Record revenue and earnings
Value investors should take notice of Bombardier after the $4.7 billion designer and manufacturer of business jets reported impressive financial results. For 2023, revenue increased 16% year over year to $8 billion, while net income reached $445 million compared to the $148 million net loss in 2022.
Besides the record revenue and earnings, free cash flow (FCF) hit $257 million. Bombardier also set new records in aftermarket revenue and deliveries. “Our stellar top- and bottom-line performance included the lowest leverage ratio in years,” added Éric Martel, Bombardier’s President and CEO.
For 2024, Bombardier projects up to $8.6 billion in revenue and $400 million in FCF. If you invest today, the share price is $48.22 (-9.4% year to date). Market analysts’ 12-month average price target is $76.43 (59% upside).
Growth and value
Lightspeed Commerce offers growth and value, notwithstanding the current stock weakness. At $18.94 per share, investors are down 31.9% year to date. The $2.9 billion e-commerce technology company reported US$237.9 million in revenue in Q3 fiscal 2024, a 27% year-over-year increase.
The silver lining was the improved US$40.2 million net loss compared to US$814.8 million in Q3 fiscal 2023. Also, Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was a positive US$3.6 million against the US$2 million forecast. Lightspeed CEO Asha Bakshani said the focus in fiscal 2025 is to grow the top line without sacrificing Adjusted EBITDA profitability.
LSPD trades at $18.94 (-31.9% year to date), but based on market analysts’ forecasts, the upside potential in one year is 48% ($27.65).
Buy and hold
Air Canada, Bombardier, and Lightspeed Commerce are well-positioned to rebound and outperform. You can buy the value stocks now and even hold for years.
