Air Canada will report their Q4 2020 earnings as well as total 2020 earnings on Friday, February 12th, 2021. Expectations around the numbers are around a $1 billion adjusted net loss in Q4 and a $4 billion loss for the year.
So why is the stock rising in February 2021? Is Air Canada a stock to buy or sell this year? Let’s dive in.
Hit hard from COVID
Travel demand plummeted in 2020 due to the Coronavirus, forcing Air Canada into a money-losing, cash-burning position all throughout the year. This is after years prior of strong financials and investing into future growth and streamlining operations.
In 2021, Coronavirus cases are still on the rise across Canada. Air Canada is not in a position where they can continue to burn more cash. On January 29, 2021, they were forced to fully refund thousands of customers’ flight tickets after the Canadian government cancelled all flights to 15 different destinations in the Caribbean and Mexico.
Due to COVID, Air Canada is burning through around $1 billion per quarter.
Outlook for 2021
Air travel demand is still at an all-time low in 2021. As more and more travel restrictions popup, Air Canada is forced to cancel flights unexpectedly at the government’s request.
Moreover, with the rise of remote work and conferencing software replacing the need for physical meetings, business travel is likely to not return to its regular pre-covid state even after the pandemic subsides. Leisure travel may bounce back, but people’s fears of travelling to foreign nations will likely prevent any large spikes in travel demands.
So why is Air Canada stock rising in 2021?
The recent surge in Air Canada stock (TSX:AC) could likely be linked to the upcoming Q4 earnings reports on February 12, 2021. Investors are hoping for a strong Q4 that indicates Air Canada’s recovery and re-growth in Q1 of 2021. However, analysts do not share the same opinion. Air travel demand will likely remain low until at least Q4 of 2021. It may see a slight recovery in the first half of 2021 as performance may be better than the detrifying 2020 year. However, future outlooks on the stock are not on the optimistic side, at least for now.
Is Air Canada a bad investment?
Air Canada is not necessarily a bad stock to own. Long-term investors who are already in the stock could see significant upside when the pandemic is over and air travel returns to normal. However, until the Canadian government makes any permanent decisions regarding air travel, or provides further financial assistance to the airline industry, Air Canada is likely not the ideal stock to buy at the moment.
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