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Highlights
- Air Canada (TSX:AC) stocks shot up by nearly five per cent Tuesday, February 8, closing at a value of C$ 24.82 apiece and noting a daily trading volume of 4.28 million.
- This sudden surge in its stock price seems to have triggered some investor interest around the aviation giant, which happens to be one of the top airlines in Canada.
- The aviation stock is currently one of the top industrials scrips on the TSX, with a market cap of C$ 8.8 billion.
Air Canada (TSX:AC) stocks shot up by nearly five per cent Tuesday, February 8, closing at a value of C$ 24.82 apiece and noting a daily trading volume of 4.28 million.
This sudden surge in its stock price seems to have triggered some investor interest around this aviation giant, which happens to be one of the top airlines in Canada.
What could have led to this increase? Let’s find out.
Why is Air Canada (TSX: AC) stock rising?
Air Canada, on Tuesday, revealed a themed aircraft in celebration of the upcoming Disney and Pixar animated movie, Turning Red, which is said to be set in Toronto, Ontario, and directed by Chinese-Canadian animator Domee Shi.
Apart from this positive announcement, another incident that created a buzz around Air Canada on Tuesday was the claim of it leaving an unaccompanied child stranded at an airport.
The mother of the 14-year-old girl, who was flying alone from Dominican Republic to St Louis, has reportedly accused Air Canada of leaving the kid stranded and on her own in Toronto's Pearson International Airport after cancelling her flight.
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Air Canada’s stock performance
The airline stock is currently one of the top industrials scrips on the TSX, with a market cap of C$ 8.8 billion.
Air Canada’s valuation metrics seem to reflect its high use of debt, which it had to expand to survive through the pandemic debacle, via its high debt-to-equity (D/E) ratio of 115.05.
It also has a relatively high price-to-book ratio (P/B) of 60.5, which generally indicates that the scrip is trading at a premium to the enterprise's book value.
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Air Canada’s financials
After the massive beating that the aviation industry worldwide took amid the pandemic, Air Canada noted some improvement as its net loss shrank on a year-over-year (YoY) basis in the third quarter of fiscal 2021. However, it was still considered a notable net loss at C$ 640 million, which included a foreign exchange loss of C$ 136 million.
The airline’s Q3 FY2021 net cash generation, at C$ 153 million, was considered “better” than expected by its management, which had anticipated a net cash burn in the range of C$ 280 million to C$ 460 million in this quarter.
Its operating revenues also surged from C$ 757 million in Q3 FY2020 to C$ 2.1 billion in the latest quarter.
Image credit: © 2022 Kalkine Media®
Bottomline
A point that investors in general have taken a note of about Air Canada is that it has reported significant losses since the onset of COVID-19 in 2020. With the rise of omicron cases and reimposition of lockdown rules, airlines are face-to-face with concerns yet again.
However, the Canadian airline reportedly expects to see positive earnings by Q2 of fiscal 2023. Hence, long-term investors can explore this aviation stock while it is still relatively low-priced.
