Should You Buy Air Canada Stock in September 2023?

A airplane sits on a runway.

Shares of Air Canada (TSX:AC) have been trending downward lately after posting solid gains of 30.5% in the second quarter of 2023. In the third quarter so far, AC stock has lost nearly 8.5% of its value to currently trade at $22.86 per share, trimming its market cap to $8.2 billion.

Before discussing whether you should buy Air Canada stock in September 2023, let’s quickly review some recent key fundamental developments affecting its price movement.

Air Canada stock

A sharp rally in Air Canada’s share prices in the second quarter was primarily driven by its better-than-expected first-quarter results, released on May 12. In its earnings report, the company highlighted “the very strong demand environment across all markets,” boosting investors’ confidence and leading to a 13% jump in Air Canada stock in May.

The stock extended this rally in June 2023, as the Canadian flag carrier made the prepayment of loans worth about $650 million, which it took from the Export Development Corporation to help it purchase 19 Airbus A220-300 aircraft. This news reflected the airline company’s strengthening financial position, driving Air Canada’s share prices up by 16.6% in June. In July, however, negative media reports about Air Canada’s poor on-time performance seemingly triggered a selloff in its stock, erasing nearly 2.8% of its value during the month.

On August 11, the largest Canadian passenger airline company announced its second-quarter results. Its revenue for the quarter rose 36.3% year over year to $5.4 billion with the help of continued strength in air travel demand. This factor also helped Air Canada post $1.85 per share in adjusted quarterly earnings, crushing analysts’ estimates of $0.68 per share. These strong results received a positive reaction from Air Canada investors as its stock rallied more than 3% on the day of its earnings event.

Despite the release of its upbeat second-quarter financial results, the broader market weakness due mainly to the dimming macroeconomic outlook, concerns about more interest rate hikes, and rising treasury yields could be blamed for driving Air Canada stock down in August. As of August 29, the stock is down 5.9% month to date.

Should You Buy Air Canada Stock in September 2023?

It’s true that Air Canada stock’s performance in the second quarter so far has been disappointing due largely to temporary concerns related to flight delays and economic outlook. Nonetheless, Bay Street analysts don’t seem to agree that these issues will majorly affect the company’s financial performance in the coming quarters. In fact, analysts currently expect Air Canada’s 2023 earnings to be around $3.67 per share, exceeding its pre-pandemic year 2019 adjusted earnings figure of $3.37 per share.

Although the possibility of a recession might take a toll on investors’ sentiments to keep Air Canada stock volatile in the short term, its long-term growth outlook remains strong with the help of continued recovery in its passenger business, along with its increased focus on cargo services in the post-pandemic era. Considering that, recent declines in Air Canada stock prices could be an opportunity for long-term investors to buy one of the most attractive Canadian stocks at a bargain in September 2023.

The post Should You Buy Air Canada Stock in September 2023? appeared first on The Motley Fool Canada.

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The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.