Why Did Air Canada (TSX:AC) Just Plunge 22%? When Will the Pain End?

Don’t look now, but Air Canada (TSX: AC) The stock appears to be taking a nosedive, with the stock falling from its March 2021 high that was just under $ 30 to its April 2021 low of $ 23 and a change of only 22%. With the rise in COVID-19 cases in Canada and numerous other parts of the world, airlines could face further turmoil. Although the bulls see the light at the end of the tunnel during peak summer travel season, which could meet the pent-up demand built up in the winter and spring months, I think there is a risk that Air Canada stock will be missed due to the slowdown in vaccine introduction .

Undoubtedly, the U.S. airlines appear to be in far better shape, with a rapid roll-out of vaccines south of the border (they even have some vaccines left for Canada). But given the uncertainty as to whether or not we will have more waves of lockdowns in the future after that third lockdown, I think taking a full dollar-cost-average position in Air Canada stocks would be a smart idea if you can are so sharp when entering the top reopening game of COVID-19.

Air Canada Stock: The Bull and the Bear Fall. Which is more likely?

There are plenty of bulls and bears on the stock right now. At the bull camp there are people who believe the third wave will be the last, with a summer season of relief and a smooth path to normal afterwards. There are people at bear camp who believe the insidious varieties of concern will advance in the race against vaccines and boosters.

There are arguments for both sides. But I think the investors who will make money from Air Canada stock are the ones who have realistic recovery expectations. Sure, if COVID-19 is defeated faster than expected, we could see the stock cross the $ 40 mark, currently analysts’ highest target price on Air Canada stock. On the flip side, if the pandemic dragons into 2022 and Air Canada needs further government financial relief, the stock could fall into the teenage or even single digits if things get really bad.

Personally, I think the bull and bear falls are low probability events. Although such scenarios involve the greatest rewards or penalties. I’m sure you’ve read the all-or-zero headlines. While Air Canada stock carries option-like risk / reward, I don’t think investors should view the stock as a company that will either skyrocket or implode to zero.

The story goes on

Fortunately for the cops, I don’t think the federal government will crash their top airline to $ 0. It will likely come with a new round of financial relief once the balance sheet is dry. The latest round of relief includes a sizeable investment by the Canadian government with a base of around $ 23. Could the next round of relief be accompanied by conditions? I wouldn’t rule it out. With higher risk comes the need to offer a bargain.

Stupid takeaway food

Air Canada stock plunges on its latest round of relief from Ottawa and rising COVID-19 cases. Is this slump a buying opportunity or the beginning of a meltdown? I think it’s a great long term buying opportunity. In the short term, however, I expect the stock to be at high risk of falling to $ 20, with perhaps a brief moment at the $ 19 level as the bad news continues to pour in.

Why did Air Canada (TSX: AC) just slump 22%? When does the pain stop? first appeared on The Motley Fool Canada.

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Fool Joey Frenette has no position in any of the stocks mentioned.

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