WestJet Sell-Off Presents Buying Opportunity

Shares in WestJet Airlines Ltd. (WJAVF.PK) have continued their steady decline with the threat of too much capacity in the market, a soft U.S. economy, and high fuel prices scaring off investors.

Versant Partners analyst Cameron Doerksen was one of several analysts that downgraded the stock last week, kicking off a 20% decline in WestJet’s stock price.

But Mr. Doerksen once again reversed his rating on the Calgary-based carrier Tuesday, changing it from a ‘hold’ to a ‘buy.” He has a C$23.50 target price on the stock.

“With 36% upside to our target and several potential positive catalysts upcoming, we believe investors should take advantage of the sell-off and build a position in WestJet,” he said.

The analyst said he expects earnings to be up in the fourth quarter of 2007, compared to 2006, and in the first quarter of 2008 with the strong loonie stimulating demand for winter destinations and a strong domestic market pushing yields higher year-over-year.

Initiatives like signing new code-sharing agreements in 2008 after its updated Open Skies reservation system is up and running should continue to push WestJet’s earnings higher going further, he said.

Mr. Doerksen said he has few concerns over the Competition Bureau’s recommendation that Ottawa forge more Open Skies agreements to increase competition in the domestic market.

He said:

We believe it would be bad policy to create an un-level playing field byunilaterally opening up Canada’s skies to foreign airlines without reciprocation and we suspect the airline industry would vigorously oppose such a move by the government. However, even if this were to occur, we don’t believe it is that significant for Canada’s airlines, at least in the near-term.