Can Air Canada (TSX:AC) Stock Recover In 2021?

May 17, 2021 10:42 AM EDT | By Anuj
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Air Canada (TSX:AC) stock has entered the optimistic curve against the short-term simple moving average. The stock’s technical indicators have been pretty much rebounding to the early first-quarter level.

Earlier this month, Air Canada posted an expected loss of C$ 1.3 billion for the first quarter of 2021, led by the halted flights. While some of its peers criticized Air Canada for flying insufficiently filled planes amid lockdown and hurting its revenues, the airline has estimated a gradual drop in its losses.

AC stock recovered by more than three per cent to C$ 25.8 in the last week, which could mean that its shareholders still have a positive sentiment for the airline’s resurgence in the upcoming quarters.

At the moment, Bay Street analysts remain positive about the national carrier’s revival in the wake of the vaccination drive. Thus, early investments in AC stock could provide higher returns.

Let us check out the airline stock’s movement & fundamentals:

Air Canada (TSX:AC)

When it comes to post-pandemic travel transition, there might be a good demand for leisure and private travel. But the demand from business travelers might still be weaker.

Air Canada and the Liberal government managed to reach an agreement for a C$ 5.9 billion financial support under the Large Employer Emergency Financing Facility (LEEFF) program in April. As per the deal, the federal government, in a rare stance, has acquired shares worth C$ 500 million in the airline.

The carrier’s share has improved by 13.3 per cent this year and increased by more than four per cent month-to-date (MTD). It is up over 76 per cent in one year, outperforming the S&P/TSX Airlines Index relatively.

Air Canada's One-Year Price Against Moving Average Multiple and Volume Chart. (Source: Refinitiv)

The stock has slightly overtaken the moving average multiple and is trading 1.55 per cent above the 30-day simple moving average (SMA), representing a short-term uptrend. Meanwhile, its 10-day share trading volume stands at 3.5 million against that of 4.25 million in the last 50 days. 

Air Canada’s Guidance For Q2 2021

Fueled by the higher cash burn, Air Canada’s revenue dipped 80 per cent year-over-year to C$ 729 million in the first quarter of 2021.

For the ongoing quarter, it anticipates its flying capacity to get doubled YoY. However, it expects an 84 per cent decline in its operated flights in the second quarter of 2021.

The airline has marginally reduced its sequential losses forecast for the current quarter.

The above constitutes a preliminary view and any interest in stocks should be evaluated further from investment point of view.


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