Shares of Air Canada (TSX:AC) have been sliding. They are down around 30% in just the past six months, and well below the highs they reached last year. Is the stock headed lower, or is this an attractive time to add it to your portfolio?
Air Canada enjoys a strong position in the industry, being the largest airline in Canada and holding a significant market share in international travel. This dominant position is critical for its long-term success, as it provides a competitive edge in both domestic and international markets. The airline's extensive network, customer loyalty programs, and strategic partnerships enhance its ability to capture market share as the industry recovers.
The recent dip in oil prices comes as a boon for airlines, including Air Canada. Fuel costs constitute a significant portion of an airline's operating expenses, and lower oil prices can significantly improve profit margins. This cost advantage could be a key driver for Air Canada's profitability in the near term, providing a cushion against other operational challenges.
The long-term outlook for travel demand remains positive, despite the current challenges. Although there could be a dip in demand due to challenging economic conditions, that’s likely to be a temporary issue for the airline.
Today, the stock trades at a lowly six times its estimated future profits and at just 0.3 times its trailing sales. It’s well below the highs of more than $50 it traded at in 2019 and can make for an appealing investment if you’re willing to buy and hold because while the stock is struggling right now, that’s not something which should persist in the long run.
