Air Canada (TSX:AC) stock has been on a massive hot streak in recent weeks. Ever since Pfizer announced its vaccine had a 90% effectiveness rate, the stock has been soaring. Airlines stand to benefit from an end to the pandemic, so the recent price action is likely related to Pfizer’s announcement. The rally may also be related to AC’s third-quarter earnings, which showed a much smaller net loss than prior quarters.
So far, so good. A vaccine is coming, Air Canada is paring its losses, and AC stock is soaring. Sounds like a buy, right?
Maybe. But before you get too excited, it’s time for a reality check. We’re currently in the middle of a second wave of COVID-19 that once again threatens air travel. That includes travel within Canada as well as international travel. Just recently, Newfoundland and PEI announced that they were withdrawing from the “Atlantic travel bubble,” a regional agreement that allowed free travel within the Maritimes without self-isolation. That kind of thing tends to put a dent in airline revenues. And it seems to be accelerating.
A vaccine could take a while
Another factor investors need to be aware of is the fact that recent vaccine trials don’t mean that a vaccine will be widely available soon. A 90-95% effectiveness rate is definitely a good sign, but there are still all the regulatory and logistical issues that come with getting a vaccine to market. Regulators have to approve the vaccine, mass production needs to proceed, local jurisdictions need to procure their supplies. All of these things take time. This is one of the main reasons that public health experts are eying next spring for vaccine deployment, not December or January…CLICK for complete article