Air Canada (TSX:AC) Stock Can Triple Your Money

Air Canada (TSX:AC) stock has a long recovery runway. Here are two ways you can invest and profit.

| More on:
Paper airplanes flying on blue sky with form of growing graph

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

Air Canada (TSX:AC) stock is a fitting example of a high-risk, high-reward investment. In yesterday’s trading, the stock appreciated more than 13%. That’s nearly two times the annualized average market returns of 7% in a single day! A related stock, Chorus Aviation, also saw a similar uptick.

It seems the big moves were attributable to expected positive news coming out soon on a potential COVID-19 vaccine. More than 100 vaccines are being developed and tested globally to stop the pandemic. With so many experts working on a vaccine around the clock, there’s hope that an effective one will arrive sooner than later.

While the big move up is speculation on short-term news, investors should be excited about the longer-term recovery of the stock. Specifically, Air Canada stock has the potential to triple investors’ money.

Who will survive?

Air Canada has survived through troubled times before — 9/11, SARS, and the 2007/08 financial crisis, for example. However, the COVID-19 pandemic is in a league of its own.

Three Latin American airlines have already filed for bankruptcy. Many others in the world will also go bankrupt if they don’t get help, including American airlines.

Thankfully, Air Canada was in a better position than many of its global peers going into the COVID-19 period. As of the end of March, it still had $6.5 billion of liquidity, which was down from $7 billion a year ago.

Understand the risks

During the last crisis, Air Canada stock fell more than 90% from peak to trough — a process that took almost 1.5 years.

Then it took another six years before the investing community was convinced that the airline company was truly on a path to recovery.

After that, it took two more years for the stock to return to its previous peak. If you’ve been counting, the whole very volatile process took about 10 years.

However, if you caught the wave midway through, you still could have tripled your money from mid-2015 to mid-2019, generating returns of nearly 32% per year!

In any case, this method of investing in the cyclical stock at a cyclical low requires high risk tolerance and the utmost patience.

Quick profits could work, too

Some investors may be aiming to make rapid profits like the +13% pop that the airline stock just experienced due to good news. They’d need to buy the stock back on meaningful dips when bad news is released. And the cycle keeps going like that.

This is a riskier strategy, but it could work if you consistently execute it and stick to your quick trading plan on the stock. However, you must believe that Air Canada will survive the turmoil. Otherwise, you wouldn’t even invest in the stock in the first place.

The Foolish takeaway

In May, the company CEO Calin Rovinescu warned that it could take at least three years for Air Canada to return to the 2019 levels of revenue and capacity. If this materializes, the stock could trade at $50 again, which would represent 2.7 times your money from current levels.

Airline stocks have delivered some of the best returns on the stock market. Accumulating shares of airline stocks like Air Canada that could survive can allow you to make tonnes of money over the next five to 10 years.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kay Ng owns shares of AIR CANADA. The Motley Fool owns shares of and recommends CHORUS AVIATION INC.

More on Coronavirus

little girl in pilot costume playing and dreaming of flying over the sky
Coronavirus

Air Canada Stock: How High Could it go?

AC stock is up 29% in the last six months alone, so should we expect more great things? Or is…

Read more »

eat food
Coronavirus

Goodfood Stock Doubles Within Days: Time to Buy?

Goodfood (TSX:FOOD) stock has surged 125% in the last few weeks, so what happened, and should investors hop back on…

Read more »

stock data
Tech Stocks

If I Could Only Buy 1 Stock Before 2023, This Would Be It

This stock is the one company that really doesn't deserve its ultra-low share price, so I'll definitely pick it up…

Read more »

Aircraft Mechanic checking jet engine of the airplane
Coronavirus

Air Canada Stock Fell 5% in November: Is it a Buy Today?

Air Canada (TSX:AC) stock saw remarkable improvements during its last quarter but still dropped 5% with more recession hints. So,…

Read more »

Airport and plane
Coronavirus

Is Air Canada Stock a Buy Today?

Airlines are on the rebound. Does Air Canada stock deserve to be on your buy list?

Read more »

A patient takes medicine out of a daily pill box.
Coronavirus

Retirees: 2 Healthcare Stocks That Could Help Set You up for Life

Healthcare stocks offer an incredible opportunity for growth for those investors who look to the right stocks, such as these…

Read more »

sad concerned deep in thought
Coronavirus

Here’s Why I Just Bought WELL Health Stock

WELL Health stock (TSX:WELL) may be a healthcare stock and a tech stock, but don't let that keep you from…

Read more »

healthcare pharma
Coronavirus

WELL Stock: The Safe Stock Investors Can’t Afford to Ignore

WELL stock (TSX:WELL) fell 68% from peak to trough, and yet there's no good reason as to why. So now…

Read more »