Raymond James lowers Air Canada stock price target to C$25 due to strike impact

Raymond James has lowered its price target on Air Canada (TSX:AC) to C$25.00 from C$27.00, while maintaining an Outperform rating, citing the financial impact of a recent flight attendant strike. The firm estimates the strike caused a C$560 million impact in Q3 2025 and reduced its 2025 EBITDA forecast to C$3.0 billion from C$3.5 billion, falling below Air Canada's suspended guidance. Despite near-term free cash flow concerns, Raymond James maintains its positive outlook, highlighting AC's attractive risk-reward, strong balance sheet, and diversified network as key factors for navigating economic challenges.

Analysis

Raymond James has adjusted its outlook on Air Canada (TSX:AC), lowering its price target to C$25.00 from C$27.00 while reiterating an Outperform rating. The revision is a direct consequence of a recent flight attendant strike, which is estimated to have a total negative financial impact of C$560 million in the third quarter of 2025, comprising C$500 million in direct costs and C$60 million from a "book-away" effect. This has prompted a reduction in the firm's 2025 EBITDA forecast for Air Canada from C$3.5 billion to C$3.0 billion, a figure that now falls below the airline's previously suspended guidance of C$3.2-3.6 billion. Despite this significant near-term headwind and an expressed concern over limited free cash flow generation through 2027, the firm's long-term conviction remains intact. EBITDA estimates for 2026 and 2027 are unchanged at C$4.0 billion and C$4.5 billion respectively, indicating that the strike's impact is viewed as a discrete, one-time event. The maintained Outperform rating is justified by Air Canada's attractive risk-reward profile, a strong and improving balance sheet, and a diversified network, which are expected to provide superior resilience against economic challenges compared to peers.

Key Decisions for Investors

• Investors with a long-term horizon could interpret the price target reduction as a reaction to a temporary setback, potentially creating a buying opportunity given the unchanged 2026-2027 EBITDA forecasts and maintained Outperform rating.
• It is critical to monitor Air Canada's ability to manage costs and preserve its balance sheet strength, particularly in light of the flagged concern regarding limited free cash flow generation through 2027.
• Traders and short-term investors should anticipate potential downward pressure or volatility in the stock as the market digests the C$560 million impact and the lowered 2025 EBITDA forecast, which now sits below the company's suspended guidance.
• Consider the unchanged long-term estimates as a signal that the core business thesis remains intact, but weigh this against the execution risk of navigating the near-term financial disruption from the strike.