The sell-off of Air Canada (GM:AIDIF) is overdone and growing fears around the carrier’s liquidity this winter are “exaggerated,” according to Jacques Kavafian, Research Capital analyst.
Mr. Kavafian upgraded shares in the country’s largest carriers from a “sell” to a “buy” Monday after the stock hit an all-time low last week to close Friday at C$2.28 a share on the Toronto Stock Exchange. Shares in the company have fallen more than 55% percentage points since the carrier reported its third quarter results on Nov. 6.
Mr. Kavafian said in a note to clients:
Fears of a cash crunch are exaggerated as we believe the company has sufficient cash to carry on business. The lack of credit ensures that Air Canada will exercise prudence and will be diligent in cutting expenses in order to not only preserve cash but to increase it. This could mean doing some sale and lease back of aircraft and cutting capacity further. Air Canada has 65 owned aircraft which could be used for refinancing.
He has a C$4 target price on the stock, representing a 75% upside on where the stock was trading at close Friday.