Air Canada (TSX:AC): Evaluating Valuation as New Toronto–Rio Route Extends Global Growth Strategy

Air Canada (TSX:AC) just touched down on a new Toronto to Rio de Janeiro route, a three times weekly seasonal service that neatly sums up the airline’s current growth and network expansion story. See our latest analysis for Air Canada. Those Rio and broader Europe network additions arrive at a time when Air Canada’s share price return tells a mixed story, with modest recent gains but a year-to-date share price return of negative 15.49 percent and a 1-year total shareholder return of negative 26.08 percent, suggesting momentum is still rebuilding rather than firmly established. If this kind of route-driven growth has your attention, it could be a good moment to see what else is taking off in aviation and defense by exploring aerospace and defense stocks. With shares still trading well below analyst targets despite rebounding earnings, does Air Canada represent a mispriced recovery story in a structurally improving travel market, or is the stock already discounting that next leg of growth? Most Popular Narrative Narrative: 22.1% Undervalued Compared with the last close at CA$18.88, the most widely followed narrative sees fair value much higher, framing Air Canada as a discounted recovery play. Digital and loyalty initiatives, including Aeroplan partnership growth and enhanced member amenities (like free Wi Fi), are increasing ancillary revenues and building a recurring, high margin earnings stream, diversifying the revenue base and supporting more consistent free cash flow and earnings growth. Read the complete narrative. Want to see what powers that cash flow story? This narrative leans on measured revenue growth, shrinking margins, and a punchy future earnings multiple. Curious which levers matter most? Result: Fair Value of $24.24 (UNDERVALUED) Have a read of the narrative in full and understand what's behind the forecasts. However, sharply rising labor costs and persistent yield pressure on key international routes could quickly erode the upside implied by the undervalued narrative. Find out about the key risks to this Air Canada narrative. Build Your Own Air Canada Narrative If you see the story differently or want to dig into the numbers yourself, you can build a personalized view in minutes: Do it your way. A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Air Canada. Looking for more investment ideas? Before the market’s next big move, use the Simply Wall Street Screener to uncover fresh opportunities that match your strategy instead of waiting on the sidelines. Capture potential income now by reviewing these 15 dividend stocks with yields > 3% that combine attractive yields with room for long term growth. Position yourself early in transformative innovation by scanning these 28 quantum computing stocks shaping tomorrow’s computing landscape. Strengthen your watchlist with mispriced opportunities by targeting these 904 undervalued stocks based on cash flows where cash flows hint at meaningful upside. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.