Written by Amy Legate-Wolfe at The Motley Fool Canada
It’s no secret that airline stocks have been some of the largest sufferers over the last few years. Most were exploding to 52-week highs if not all-time highs, in some cases. However, since the pandemic, many are still struggling to even get to half of the share price enjoyed beforehand.
Yet at the same time, bookings have never been higher. So, are airline stocks a good buy in November 2023, especially for those seeking long-term growth, as we continue to see improvements in the industry? Let’s look at two and see what analysts believe today, along with what earnings are telling us.
Air Canada stock
Let’s start with perhaps the more obvious of airline stocks. Air Canada (TSX:AC) hit a share price of $50 before falling dramatically in March 2020. Even with government bailouts and even hitting bookings that are higher than 2019 levels, Air Canada stock still continues to struggle.
This mainly comes as the company certainly has higher bookings, but it hasn’t gotten rid of a few other problems. Part of the problem is that while business flights are better, low-cost carriers are still preventing the company’s growth in the sector. Moreover, bookings aren’t great if they cannot keep up with the demand.
Air Canada stock continues to have issues when it comes to cancelling flights or, indeed, having enough flights available. This comes as the company continues to try and keep up with a profit — something that has only been achieved recently.
That being said, the company continues to surge past earnings estimates. And in the face of strikes, higher costs, inflation, interest rates and more, the company is still managing to put out more flights. This includes more flights to Asia and gaining back its Aeroplan loyalty program. Together, these things should create great growth in the future. Yet with shares still down 3% in the last year and less than half of 2020 levels, it could still be a long climb upwards.
While Onex (TSX:ONEX) isn’t necessarily an airline stock, it does invest in WestJet, another of Canada’s top airlines. The company is a special purpose acquisition company, focusing on large companies such as WestJet stock. And honestly, that’s what makes it such a great investment.
The company doesn’t rely on the airline company alone for success. Instead, it can take the success of its other contracts and use it to help fund what’s necessary for WestJet. The company couldn’t have been purchased at a better time — right before the pandemic. Now, it’s quite a successful company that’s indeed seeing improvements across the board.
When it comes to WestJet, this has meant decreasing costs wherever the company can. This has included layoffs as well as cutting back on routes until there are more improvements. However, there have been signs that the company is already back and ready to fly.
This month alone, WestJet added two new routes to their transatlantic service. While they cut routes from Calgary to London, they did increase Calgary to Edinburgh thanks to demand. Meanwhile, Onex stock has been improving as well. In the most recent quarter, Onex saw value from private equity investments go up 4% year over year, it has made further acquisitions, and it hit $34.2 billion in fee-generating assets under management.
So, while investors cannot say whether airline stocks are back fully, especially as we continue this higher interest and inflationary environment, improvements are underway. Onex stock and Air Canada stock are certainly the ones to watch now. However, if you’re going to choose one over the other, Onex stock has the diversification that could see shares rise even further in the coming months.
Before you consider Air Canada, you'll want to hear this.
Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in November 2023... and Air Canada wasn't on the list.
The online investing service they've run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 24 percentage points. And right now, they think there are 5 stocks that are better buys.
See the 5 Stocks * Returns as of 11/14/23