Q4 reporting and beyondGreat to see the worlds "investment grade" and "balance sheet" in the same sentence regarding AC stock. I would have been laughed off baystreet a few years ago for uttering those words in the same sentence. Never would an investment firm regard this company as an investment quality stock until now. That being said I think we will see a third test of the long term resistence in the high 14s. Until such time I'm expecting some sideways movement with a possible back test for a few reasons. Q4 reporting is typically a weaker period for AC stock since it correlates with their less busy season. I've stuck it out through each of the last year end reports, and each drop less dramatic than the previous. Although I expect some weakness again over the next couple of months, I anticipate it being far less dramatic than the last few years.
From a technical perspective as I've said before, the 3 year chart shows an ascending triangle with the price rejected in the high 14 dollar range. When you look at the chart from this perspective, low near term price targets of 13.40 and 11.60 are possibilities to consider. I recommend adding stock if you are lucky enough to get this price range. The 3 year chart shows the backtests are going to be rather limited going forward. If your window for investment here is 1-3 years, at some point you stand to gain tremendously adding at this level for below. Once we need a break above the high 14 dollar range there is little long term resistence until the IPO price. From there the $20-30 price range becomes more realistic with gap closure to AC's peers.
The reason I'm still 1-3 years away from this expectation is that the balance sheet is going to be the main driver behind this price surge. Obviously once AC's balance sheet becomes investment grade and paying a dividend, a trading range in the $30-40 range becomes more realistic. I'd love to see AC's debt cut in half for this to happen. I care little about buybacks at this point and would like to see meaningful improvement in debt. Reduction. The financing AC was able to negotiate back in the fall was a great win for AC.
That said, I don't see anything near term to suggest this will push through that long term resistence just yet. Jet fuel is also creeping back up, and my concern here is how the market may perceive this as usually the Canadian dollar has correlated with the price of Jet fuel. With the dollar index in a bullish uptrend this may create a scenario where the CDN stays weak while Jet fuel surges higher. This of course remains to be seen and keep in mind this will be a market perception. I think the impact will be much less considering the company's international footprint in relation to where we were from this standpoint 3 years ago.