Air Canada (TSX:AC) stock is rising. Time to buy?

Summary 

  • Air Canada (TSX:AC) stocks witnessed a recovery of nearly nine per cent in the past week.
  • The spike came as the national carrier reported narrowed losses in Q2 FY21 on a year-over-year (YoY) basis on Friday last week.
  • The airline’s share price could surge once the COVID-19 related travel restrictions are eased globally.

Air Canada (TSX:AC) stocks recovered by nearly nine per cent in the last one week as the company posted reduced cash burn outlook in its latest earnings report on Friday, July 23. The stock increased by almost two per cent on Monday, July 26.

Earlier on Monday, the national airline said that it has commenced a private offering of senior bonds, where it is looking to raise around US$ 2.75 billion.

In its financials released last week, the Montreal-based firm reported narrowed losses on a year-over-year (YoY) basis for the second quarter of 2021. It also registered a rise in its operating revenue as domestic travel had gradually resumed in Q2 FY21.

In April, the federal government extended a support package worth US$ 5.9 billion to Air Canada, including loans and equity. Following this, the Canadian government became a stockholder in Air Canada for the first time in nearly three decades, holding shares and warrants worth C$ 500 million (as of April 2021).

In its current quarter forecast, the aviation giant expects to curtail its net cash burn by nearly half in Q3 FY21, as compared to that of C$ 745 million in the previous quarter.

Let us delve into the leading carrier’s stock performance and financials.

 

Air Canada (TSX:AC)

The airline has been boosting its working capital to take off smoothly in the post-pandemic era, as the demand for private travel and business class bookings are likely to rise once the inoculation drive nears an end. 

AC stock is trading at C$ 25.5 apiece, with a market cap of C$ 9.12 billion. The stock has delivered 55 per cent returns in the past one year and is up 12 per cent year-to-date (YTD).

The carrier’s stock has traded almost flat quarter-to-date (QTD). However, it has rebounded as much as 76 per cent from its 52-week low of C$ 14.48 apiece (November 02, 2021).

At its previous share price, Air Canada stock advanced by 6.5 per cent against its 200-day simple moving average, representing a long-term upside pattern.

Trading in Air Canada stock appears to have improved over the last 10 days, with an average volume of 2.91 million shares, as compared to its 30-day average volume of 2.75 million.

The stock is testing its short-term moving average multiple. It may face the first resistance near C$ 28 apiece and the second resistance at C$ 30 apiece. It continues to take support around C$ 25 apiece.

The airline stock could gain momentum once the COVID-19 wave slows down globally as a majority of its revenues come from international flights.

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