Air Canada (TSX:AC) stock price has skyrocketed in the past few weeks, making it one of the best performing Canadian companies. AC has risen in the last eight consecutive weeks, moving to a high of $24.20, its highest level since July 31st. It has soared by more than 67% from its lowest level this year, giving the flag ship Canadian airline a valuation of over C$8.67 billion.
Air Canada stock formed a bullish pattern
There are signs that the Air Canada share price will continue doing well in the coming months after it formed a golden cross pattern on the daily chart. This cross happened after the stock formed a 200-day and 50-day Exponential Moving Averages (EMA) crossed each other.
It has recently crossed the important resistance level at $20.45, its highest level in April this year, while the Average Directional Index (ADX) has soared to 50, signaling that the trend is strengthening.
The Relative Strength Index (RSI) and the MACD indicators have all pointed upwards. It has also jumped above the 78.2% Fibonacci Retracement level. Therefore, the stock will likely continue soaring as bulls target the year-to-date high of $26, which is about 8% above the current level.
A break above $26 will point to more gains towards the key resistance level at $31, its highest level in March 2021, which is about 29% above the current level. The stop-loss of this pattern is at $23.
Air Canada’s business is doing well
Air Canada’s stock price surge has coincided with that of other global airlines. In Europe, the IAG (LON:ICAG) share price has soared by over 163% from its lowest level in 2022. In the US, Delta Air Lines (NYSE:DAL) stock has spiked to $65, up by 113% from its 2023 lows. United and American stocks have also surged in the past few months.
Air Canada published better-than-expected financial results recently, Its operating revenue dropped by 4% in the third quarter to C$6.1 billion, mostly because of a strike action by pilots during the peak season. Like other airlines, its revenues were impacted by low airfares.
The company carried 12.6 million passengers during the quarter, a 0.1% drop from the same period last year. Similarly, its operating income of C$1.04 billion was a $375 million drop.
With the strke concerns done, the management expects its business to return to growth in the coming months. ON this, it expects that its capacity will increase by 5% this year, while its adjusted EBITDA will be $3.5 billion.
Like other airlines, Air Canada is modernising its fleets, especially by acquiring the recently launched Airbus A321XLR plane. It will receive 30 of them in the next five years, as part of a 90 aircraft order that includes Airbus A220, Boeing (NYSE:BA) 787 and 737 Max. Over time, its spending on these aircraft is expected to peak in 2026 and then drop sequentially.
The other potential catalyst for the Air Canada stock price is that it has a solid balance sheet after it slashed its total debt stash by half in the last two years. It has a total liquidity of C$10.3 billion and net debt of C$3.4 billion.
Additionally, Air Canada is moderately valued as it has a forward price-to-earnings ratio of 9.07, lower than American Airline’s, Delta Air Lines, and United’s 19, 10, and 9.5, respectively. Its price-to-book multiple is also lower than its peers.
Air Canada is also highly diversified in terms of destinations. It makes most of its money by connecting Canada and European markets, followed by domestic, and the United States. It is also benefiting from its 8 million Aeroplan active members.
Therefore, Air Canada stock has strong fundamentals and technicals, meaning that it has more room to climb in the near term.