“Air Canada (TSX:AC) investors have been eagerly awaiting a rebound in the company’s share prices in the post-pandemic era. However, despite the airline’s projected strong earnings for 2023, Air Canada stock continues to struggle. In fact, it is still down 63% from its 2019 closing level, while the TSX Composite has risen 14% during the same period. So, what lies ahead for Air Canada stock in 2024? Let’s delve into some key factors that have negatively impacted its share price movement in recent years.
Air Canada stock’s struggle continues in 2023
The decline in Air Canada stock began in early 2020 when COVID-19 was declared a global pandemic. Investors became cautious about sectors like travel and hospitality, including the airline business. These concerns led to a severe crash in AC stock during the first quarter of 2020, with a 67.5% drop.
While there were valid reasons to worry about the pandemic’s impact on Air Canada’s business, the massive decline in its stock was largely due to panic selling among retail investors. Many sought to avoid potential damage to their stock portfolios. Although AC stock stabilized throughout the rest of the year, it has struggled to fully regain investors’ confidence, trading more than 60% below its 2019 closing level.
Here’s what could drive AC stock in 2024
While Air Canada is not the only stock that has lost investor confidence in the post-pandemic era, its continued financial recovery, strong liquidity, and improving fundamentals make it difficult to ignore, despite recent declines. Several factors could play a significant role in guiding Air Canada stock in 2024.
Jet fuel prices, air traffic growth, and the possibility of a recession are key factors to consider. Low jet fuel prices can boost airline profitability, but moderate price volatility may not erase Air Canada’s profits if demand remains strong. Fortunately, we have witnessed a substantial improvement in air travel demand, including business and leisure travel, over the past two years. Barring a severe recession, this trend is expected to continue in 2024.
Regarding the possibility of a recession, while high inflation and elevated interest rates could lead to a moderate recession in the near term, the strength in the labor market and consumer sentiment suggests that it is unlikely to be serious, as Bank of Canada governor Tiff Macklem recently indicated.
It is also important to note that since 2020, Air Canada has demonstrated flexibility in adjusting its strategic focus on different business segments based on economic and industry trends.
Considering all these factors, it would not be surprising to witness a spectacular recovery in Air Canada stock once economic concerns gradually subside. Investors may come to realize the undervalued potential of AC stock after years of significant losses.
In conclusion, while Air Canada stock has experienced ongoing challenges, there are reasons to remain hopeful for its future performance. With its recovery on track, strong fundamentals, and adaptability, AC stock may yet stage a remarkable comeback. Keep an eye on the economic landscape and industry trends to gauge the trajectory of Air Canada stock in 2024.”
Reference
