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Air Canada (TSX:AC) Stock: Could it Hit $40 by the Summer?

Adam Othman
·3 min read
Aircraft wing plane

The summer of 2021 is bringing something very different for different countries of the world. Some countries are rejoicing after flattening the curve and putting the worst of the pandemic behind them, while other countries are battling the harshest battle against the pandemic yet. Summer travel is expected to revert to its semi-pre-pandemic form, as the E.U. plans to ease non-essential travel restrictions next month.

This could mean the revival of the hospitality industry or a true start of a full recovery. Hotels, resorts, transportation businesses might all see something positive this summer. And this impact is expected to reach airlines like Air Canada (TSX:AC) as well.

Air Canada stock

Air Canada stock is recovering step by step. Last year, the stock struggled to break through the $20 valuation ceiling, and this year, the magic number that the stock seems to be hovering around is $25 per share (so far). The share price came quite close to the $30 mark at its peak, but it couldn’t break through.

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The government aid, which was considered a mixed blessing by many investors, didn’t prove to be the growth catalyst many were hoping for. However, it did solidify Air Canada’s financial footing considerably. But if the summer travel is really back on the menu, the Air Canada stock might be able to reach new heights before the summer is over, possibly even $40 per share.

But the ease of travel in Europe might not translate as well for travel in and out of Canada. The government is looking into some kind of vaccine passport, allowing vaccinated Canadians to travel internationally. It might not be an ideal situation for Air Canada, but it’s still better than the travel restrictions that the company was facing a few months ago.

What the future holds

The chances that Air Canada might reach new heights and might hit $40 by the end of this year are quite high, but the same cannot be said for the summer. The company is making amends — i.e., issuing refunds with the government aid money — and will probably start reopening domestic routes it suspended. It might be a few quarters before the company’s operational activity increases enough to tip the financial scales towards profitability.

But the summer travel can be a catalyst that can expedite Air Canada’s recovery. If travelers flock to summer destinations and government doesn’t complicate travel with its restrictions, Air Canada might see a boost in stock value that pushes it to $40 this summer. And the momentum might be enough to carry the stock to its pre-pandemic heights and beyond.

Foolish takeaway

Air Canada might still be a good bet for a 100% growth (when the stock reaches its pre-pandemic valuation), but an exact timeline is difficult to predict. It might be as soon as this year’s end or as late as 2023 when the operational activity is expected to revert fully back to normal.

The post Air Canada (TSX:AC) Stock: Could it Hit $40 by the Summer? appeared first on The Motley Fool Canada.

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Fool contributor Adam Othman has no position in any of the stocks mentioned.

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