Shares of Air Canada (TSX:AC) have been rising 25% in just the past three months. Investors have been bullish on the top Canadian airline as oil prices have been falling while travel demand has been strong. And according to the International Energy Agency (IEA), the demand for oil is going to slow significantly in the years ahead. With demand shifting to cleaner energy and electric vehicles, the peak is near. And if oil prices continue to decline, airline stocks could be the big winners as fuel represents a big operational cost for them.
In May, Air Canada reported first-quarter revenue of $4.9 billion that was nearly double what it reported in the prior-year period. And it also posted a profit of $4 million which marked a significant improvement from the $974 million loss it incurred a year ago. With more stability in the company's operations and demand for travel looking strong, Air Canada stock could continue to be a hot buy for the foreseeable future.
The stock is trading at a forward price-to-earnings multiple of just nine. And although it has been rallying, it's still nowhere near where it was before the pandemic began, when its shares were trading above $50 a share. That's why despite the stock trading around its 52-week high, it may still not be too late to invest in Air Canada's stock. And if you're planning to hold on to the stock for multiple years, the returns could be even more significant if oil prices continue to fall.
