While two analysts hiked their price targets for Air Canada (AC.TO) after the airline unveiled 2025 and long-term targets at its investor day this week, shareholders “came away disappointed,” with the stock dropping around 12 per cent since Monday.
Air Canada released its near- and long-term financial targets on Tuesday, aiming for a 36 per cent jump in 2028 operating revenue, in part due to strong demand for leisure travel across domestic and international routes. The airline forecast that its 2025 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) would be in the range of $3.4 billion to $3.8 billion.
While the forecast was roughly in line with analysts’ estimate of $3.63 billion, according to data compiled by LSEG, TD Cowen analyst Tom Fitzgerald wrote in a note to clients on Wednesday that “our sense is that investors were looking for EBITDA between $3.7 billion and $4 billion next year.” He likewise claims that the expectation free of charge capital margins and capital investment information “disappointed versus expectations.”
“All told, we believe investors were looking for a bigger announcement and came away disappointed,” Fitzgerald created.
“Others viewed the language around 2028 and 2030 aspirations not being guidance as indicative that the company lacks conviction in its plan. It’s possible the company is not trying to set the bar too high for itself, and it ends up outperforming these metrics.”
Investor belief was adverse complying with the launch of the lasting targets on Tuesday, with shares dropping 9 percent on that particular trading day. Shares slid once more on Wednesday, and were trading level since Thursday early morning. Since Monday’s close, Air Canada’s supply is down around 12 percent, getting rid of gains made considering that very early November.
Still, some experts state the targets Air Canada launched are “realistic” and see chance in advance for the business, with a minimum of 2 increasing the cost target for Canada’s biggest airline company.
“We attribute the sell-off to profit-taking following a ~55.0 per cent rally in the shares since Oct. 1, with a near-term outlook in line with expectations. We would remain buyers on the weakness given healthy demand conditions, the renewed buyback program, and a significant discount to US peers,” ATB Capital Markets expert Chris Murray created. He states an “outperform” ranking for Air Canada, and raised his 1 year cost target from $28 per share to $31 per share.
BMO Capital Markets expert Fadi Chamoun states an “outperform” ranking for the airline company’s supply and likewise treked his cost target from $29 per share to $31 per share. He identifies Air Canada’s medium-term structure as “realistic as it leverages the company’s strong competitive moat and strategic position within the Canadian airline industry, and more specifically, capitalizes on its leading position in international and premium travel markets.”
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