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Buzz on the Bullboards: A Comeback for Travel Stocks?

Stockhouse Editorial
0 Comments| November 12, 2020

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(Image via @AirCanada on Twitter.)

This is the first trading week since the new US President and Vice President-elects were declared, bringing some stability to North American markets. Dow futures rallied this week on news that a major US drug company’s COVID-19 vaccine trial showed 90% efficacy. It was a broad surge in stocks that included up to 25% gains in airline and cruise stocks, as traders considered that eventual widespread vaccine distribution could allow for safe travel once more. Nasdaq futures were lower, as many tech stocks, which have been beneficiaries of the stay-at-home economy caused by the pandemic, were under pressure.

What do Stockhouse Bullboarders think of this news? There has been some significant news on the cannabis front as well, with several major Canadian licensed producers (LPs) posting quarterly fiscal results this week that should give investors a sense of how the Canadian pot sector is faring.

Canopy Growth Corp. (TSX: WEED, Forum) reported in its Second Quarter Fiscal 2021 financial results that it had achieved record quarterly net revenue of $135 million, but a net loss of $97 million, with an adjusted EBITDA or (earnings before interest, taxes, depreciation and amortization) loss of $86 million, this marked a 43% improvement versus Q2 FY20.

Meanwhile, Edmonton-based Aurora Cannabis (TSX: ACB, Forum) released its Fiscal First Quarter 2021 Results, highlighting cannabis net revenue of $67.8 million, adjusted gross margin of 48%, while also achieving targeted Selling, general and administrative expense during its Q1 2021.

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What’s in a name? HEXO Corp. (TSX: HEXO, Forum) continues to make headlines, this time the Ottawa consumer packaged goods cannabis company reached a settlement after pursuing legal action against a California business using the HEXO name and trademark.

Bullboarders seem skeptical, if optimistic around news over Aphria Inc. (TSX: APHA, Forum) and its plan to enter the US via a major craft brewer. APHA is buying SweetWater Brewing Co. for $300 million (USD) in a cash-and-stock deal that the company is financing through a mix of its existing cash and some debt. The agreement will give Aphria exposure to the giant US consumer market where it will be able to introduce some of its Canadian brands as new beers to acclimatize potential future buyers of the company's cannabis products once they can legally do so.

During a conference call with analysts, Aphria CEO Irwin Simon said that the company is partnering with the SweetWater team to develop THC-infused beverages for the “a portfolio of brands closely aligned with a cannabis lifestyle.”

Cannabis stocks continue to impress, and people want to know more, if our recent Investor Pulse Poll is any indication, the industry topped trader interest, with tech coming in second.

Despite that level of interest, we have noticed that investors have been moving from trading in tech to travel stocks this week with the positive news around COVID-19 pharma treatments, have you been following suit? Let us know your thoughts in our Investor Pulse Poll below.

(Click image to vote.)

One industry that appears to have the potential to make a comeback in the near-term is the travel industry, with Air Canada Inc. (TSX: AC, Forum) poised to see solid gains once more if this pans out.

AC shares have been hit hard by COVID-imposed travel restrictions and it seems that we still have some unfortunate news to get through before things really turn around, but the airline has nearly completed its COVID-19 Mitigation and Recovery Plan. In its Q3 2020 fiscal report, the airline stated that total revenues of $757 million in the third quarter of 2020, which is a decline of $4.773 billion (86%) from Q3 2019. Q3 2020 also saw a negative EBITDA of $554 million compared to third quarter 2019 EBITDA of $1.472 billion. Air Canada reported an operating loss of $785 million in Q3 2020 compared to operating income of $956 million in Q3 2019. Total revenue passengers carried declined 88%in the quarter compared to last year’s Q3. Unrestricted liquidity amounted to $8.189 billion at September 30th, 2020.

The airline’s shares have lost more than 50% of their value since this time last year, but there is a lot of historic value in its operations, so this could represent a bargain for investors if it returns to its premier performance over the next few months to a year.

(Air Canada stock chart, Nov 2019 – Nov 2020. Click to enlarge.)

It isn’t all bad news though, the departure of Air Canada flight AC1810 from Toronto to Cancun marked the return of Air Canada Rouge to the skies.

Vice President, Network Planning and Alliances at Air Canada, Mark Galardo stated, “Air Canada Rouge remains an important part of our overall strategy in rebuilding Air Canada's global network. As leisure traffic resumes, we will progressively add Air Canada Rouge to select North American leisure markets from Eastern Canada.”

Pandemic-related disruptions have also caused numerous headaches for Bombardier Inc. (TSX: BBD , Forum)’s business. The transportation company’s Q3 2020 results detailed total revenues of $3.5 billion, lower by 5% year-over-year, while business aircraft revenues reached $1.2 billion on 24 deliveries, growing 10% year-over-year, driven by accelerating Global 7500 deliveries.

Bombardier’s President and Chief Executive Officer Éric Martel continues to be optimistic about the future.

“We are very excited about our future as a focused business jet company, about our opportunities to grow the services business, and to leverage our industry-leading product portfolio,” he said in a news release that offers further detail.

“We look forward to sharing the details of our plans in the near future, as we finalize our debt management strategy and cost-cutting initiatives to ensure our profitability in the current market and strong growth once the pandemic subsides.”

While most companies adapt to doing businesses under this pandemic, Gatekeeper Systems Inc. (TSX-V: GSI, Forum) has had a busy week working to keep students (and the public at large) healthy during this time.

The leading provider of intelligent video solutions for public transport and smart cities announced on Monday that it had secured a purchase order from a school district in British Columbia to equip their school bus fleet with the Company's recently launched Intelligent Temperature Sensing Systems (ITSS, a contactless system that can determine body temperature within 20 milliseconds).

As COVID-19 cases in BC reach new record numbers, Gatekeeper’s Chief Executive Officer Doug Dyment, CEO of Gatekeeper, commented that school district customers in the province are turning toward the ITSS solution to assist in their efforts to provide the safest environment possible for schools and buses.

“We believe passenger health monitoring in public transportation is a North American growth trend that is only just beginning, and we are well able to design and deliver innovative solutions that improve passenger safety. This is our first ITSS sale in BC and it will equip the bus fleet of one of the 60 school districts operating in the province.”

What the "Buzz"

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GSI followed this up with this that it had completed a $6.3 million (CAD) contract for the design and supply of digital video recorders and crash hardened memory modules that record and protect operating evidence in rail transit applications. They can be used to verify crew actions and train operating conditions, which greatly aids accident investigations in the same way black boxes are used in the airline industry, and are compliant with the recommendation made by the National Transportation Safety Board.

Calgary-based oil and gas company Surge Energy Inc. (TSX:SGY, Forum) had a lot of news to report this week, chiefly that it had received lender approvals for a total of $90 million in new credit commitments. In addition to the Term Facility, SGY has received a credit commitment of up to $50 million, providing the company with a significant new Syndicate banking partner in its existing $335 million credit facility. For full details on this story, click here.

Meanwhile, natural gas play CGX Energy Inc. (TSX-V: OYL, Forum) just released its Q3 2020 operational highlights, having completed its evaluation of the 3D seismic campaign covering the northern region of the Corentyne Block in the Guyana-Suriname Basin on the northeast coast of South America. CRI, the operator, had identified multiple high potential prospects. CRI’s current high-graded prospect identified in the northern region of the Corentyne Block has been named Kawa.

In October 2020, CGX began various contracts to recommence work on its Berbice Deep Water Port project. Currently, the Company is completely refurbishing a 3.1 km road leading from the Corentyne Highway to the Port and is in the process of tendering for the construction of a bridge leading from the Corentyne Highway to Seawell Village, which connects to the road leading to the Port site.

Finally, we have Baytex Energy Corp. (TSX: BTE, Forum), who had a lot of positive news to share from its Q3 2020 financial and operations report. The Calgary oil and gas company reported that it had generated production of 77,814 barrels of oil equivalent per day (boe/d) (82% oil and NGL) in Q3 2020 and 82,907 boe/d (82% oil and NGL) for the first nine months of 2020. BTE delivered adjusted funds flow of $79 million ($0.14 per basic share) in Q3/2020 and $229 million ($0.41 per basic share) for the first nine months of 2020. The company also generated free cash flow of $60 million ($0.11 per basic share) in Q3/2020 and $16 million ($0.03 per basic share) for the first nine months of 2020.

As trading continues to pick up during the autumn season, expect more attention and heated discussion on the Stockhouse Bullboards and make sure you’re up to date on what’s happening in the community. Next week, we’ll continue to bring you the buzz around the hottest sectors and companies. For previous editions of Buzz on the Bullboards: click here.

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FULL DISCLOSURE: Gatekeeper Systems Inc. is a client of Stockhouse Publishing.

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