Written by Joey Frenette at The Motley Fool Canada
Air Canada (TSX:AC) and Aritzia (TSX:ATZ) are two of the more battered Canadian stocks in recent years. Though 2024 may not mark the beginning of a huge turnaround, I think that investors looking to do well over the next five to 10 years should strongly consider watching the two battered plays, as they look to stage some sort of sustained turnaround over the next few quarters.
Now, things won’t be made any easier, as the macro headwinds continue to stick around. Still, there’s reason to be hopeful that consumer spending will gradually recover in due time. For now, it seems like a pretty nasty recession is being priced into the share prices of both firms.
In any case, I’d not look to throw in the towel at these ominous depths. Though untimely, I view both deep-value plays as worthy additions to any patient investor’s long-term-focused portfolio. But is AC or ATZ stock a better bet right now? Let’s check out the shares of both companies.
Air Canada stock
It’s been another miserable past year for Air Canada stock, which recently shed all of its summertime gains on the back of the air travel bounce-back. Indeed, AC stock is $17 and change again and could be at risk of falling to the lower teens if a recession hits harder than expected.
The Canadian consumer has been weighed down lately. But I think air travel demand could stay relatively robust as we enter the chilly season. The main sore spot hitting Air Canada and the airlines has to be the scorching hot levels of inflation. Higher fuel costs and labour are doing the firm no favours, as it looks to navigate a questionable economic environment. Inflation is hurting almost everybody these days, after all.
As inflation backs down, rates fall, and consumer sentiment shifts positively at some point over the medium to long term, I’d look for AC stock to start being constructive again. Of course, airline stocks are going to be turbulent going into 2024. But if you’re brave enough to punch your ticket, I think there’s a good shot at solid long-term gains from these depths.
Aritzia is a fashionable women’s clothing firm that’s out of fashion on Bay Street right now. The recent quarterly sales trends were a tad concerning, to say the least, with 2% growth year over year. Indeed, flat-ish numbers could remain, as the consumer faces budget constraints. In due time, the consumer will heal, and investors will want to stay invested in robust retailers like Aritzia if they’re seeking upside.
In the long term, Aritzia has all the right growth drivers in place. The e-commerce platform is quite impressive and could really help the firm climb out of its depths on the other side of a potential 2024 recession. Margins could continue to improve from here, as the company continues to bring costs and all the sort back into order.
From a long-term perspective, it’s really hard to overlook the company’s growth prospects. At the end of the day, Aritzia is still a great brand that will sell well when times are good. The only question is when will economic conditions be good again? For long-term investors, I think timing is less important than the ability to ride out the storm.
Better buy: AC or ATZ stock?
Air Canada stock seems like a better deal right here. Air travel demand could bounce back swiftly, perhaps before the next big summer travel season. Further, the stock looks deeply discounted at levels close to the depths of 2020.
Before you consider Air Canada, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and Air Canada wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 24 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 11/14/23