Air Canada (TSX:AC) Stock Jumped, But What Is Behind The Move?

How the latest results and guidance frame Air Canada stock today

Air Canada (TSX:AC) has just delivered third quarter earnings that paired higher revenue with weaker net income, alongside fresh capacity guidance and a new share repurchase plan through November 2027.

That mixed message is showing up in the chart. Air Canada’s 1 day share price return of 4.46% came after the earnings release, yet the 30 day share price return is down 16.80% and the 90 day move is down 20.51%. At the same time, the 1 year total shareholder return is 11.88% and the 3 year figure is 17.36%, which points to fading near term momentum but a still positive multi year record.

Scan how Air Canada’s mixed earnings reaction compares with other companies showing similar patterns in our curated 5 high quality undervalued stocks list.

Air Canada now trades at a sizeable discount to both analyst targets and some intrinsic value estimates, even after the post earnings bounce. Is the market being prudently cautious because of weaker profits, or overly pessimistic about this recovery story?

Most Popular Narrative: 36% Undervalued

On the most followed valuation view, Air Canada’s fair value sits at CA$32.84, well above the last close of CA$21.09. This puts today’s volatility against a backdrop of a much higher long term estimate built on detailed cash flow work using an 11.1% discount rate.

Digital and loyalty initiatives, highlighted by Aeroplan's roughly $10b valuation and membership growth to over 10 million members, plus a partial monetization that funded debt repayment and an $800m share buyback, are increasing high margin loyalty revenue and may support earnings per share and free cash flow.

See why 107 investors see Air Canada as 36% undervalued.

Result: Fair Value of CA$32.84 (UNDERVALUED)

Still, rising labor costs and fuel related pressure on Air Canada’s adjusted EBITDA and free cash flow guidance could quickly challenge the idea that the stock is currently 36% undervalued.

Find out about the key risks to this Air Canada narrative.

Next Steps

If you are conflicted about whether this mixed picture around Air Canada should leave you cautious or optimistic, and want to move quickly while sentiment is still resetting, take a closer look at the company’s upside case by reviewing the 3 key rewards.

Looking for more investment ideas beyond Air Canada?

Do not stop with Air Canada. Broaden your watchlist with a few targeted stock ideas that match what you are trying to achieve.

• Spot potential bargains early by scanning companies on our focused list of 8 high quality undiscovered gems before they hit everyone else’s radar.
• Strengthen your downside protection by zeroing in on a 9 resilient stocks with low risk scores that filters for businesses with more resilient profiles.
• Round out your portfolio’s quality core by reviewing a curated list of solid balance sheet and fundamentals (6 results) that highlights companies with sturdier financial footing.

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