Extremely bullish on ACThe case for the next run has never been more strong in my opinion. About the only reason to be bearish on the stock would be the higher fuel costs. This was an initial concern of mine along with the weaker Canadian dollar. Then the recent surge in GDP came in and I believe was also reflective of the YOY increase in RASM which AC reported. This also creates a bullish case for a stronger Canadian dollar. For those of you who have been around this stock over the past 5 years will attest to AC’s decrease in volatility on currency fluctuations due to better costs, more USD revenue on international expansion, etc. Look, it’s true the airlines went through a bull cycle on lower fuel costs, but keep in mind that also had a yoyo effect with lower fares and capacity cuts. Demand and pricing power are king in this industry. When AC initially ran from $2-8 in 2013, oil was over $100 a barrel. Current record demand, RASM increase, capacity cuts support a medium term surge in AC’s stock price.
Let’s not forget recent problems from Westjet, and Saudi Arabia withdrawing flights provide AC a window of opportunity to push more towards a monopoly in the Canadian airline sector. Furthermore I think AC will close the deal with Aimia and put forth the value in which Aimia indicated they would move on over the next few weeks. This is what the average customer from the rewards program wants so this is what AC will provide. AC indicated last year that having their own rewards program would add $2 billion dollars in value to the company, so picking up Aimia for $450 million is a complete no brainer IMO. The stock has mostly been muted throughout the whole takeover offer, but firms such as scotiabank indicate the market will be bullish if a deal in fact does close.
Full disclosure: initially bought just before Q2 and doubled up on the 24.35 resistence breakout today. I think this is a $30 stock over the next few months. Cheers.