Air Canada stock price target raised to C$25 from C$16 at TD Cowen

TD Cowen has significantly raised its price target for Air Canada (TSX:AC) to C$25.00 from C$16.00, while maintaining a Buy rating, following an updated model reflecting strong Q1 2025 results and optimistic full-year 2025 guidance. The firm elevated its EBITDA estimate to the high end of Air Canada's projected range, citing positive factors including a strategic demand shift from Canada-U.S. to domestic and Atlantic routes, favorable foreign exchange conditions, and easing U.S.-Canada trade tensions. This revised C$25 target, based on 3.5 times the airline’s expected 2026 EV/EBITDA, underscores TD Cowen's constructive view on the stock's potential.

Analysis

TD Cowen has significantly increased its price target for Air Canada to C$25.00 from C$16.00, while reiterating a Buy rating. This revision is predicated on an updated model that incorporates the airline's first-quarter 2025 results and full-year 2025 management guidance, leading the firm to adjust its own EBITDA estimate to the high end of the company's projected range. Key positive drivers underpinning this outlook include a strategic shift in passenger demand, where a mid-teens percentage decline in Canada-U.S. travel has been redirected to stronger domestic and Atlantic routes rather than being lost. Furthermore, the forecast is bolstered by tailwinds from more favorable foreign exchange conditions and an easing of trade tensions between the U.S. and Canada. The new price target is based on a valuation of 3.5 times Air Canada's projected 2026 EV/EBITDA, signaling TD Cowen's strong conviction in the stock's upside potential from its current levels.

Key Decisions for Investors

• Given the substantial price target increase and multiple identified tailwinds, investors could view this as a strong reinforcement of a bullish thesis for Air Canada.
• Monitor the performance of domestic and Atlantic routes, as their strength is a critical factor in offsetting the continued, albeit managed, weakness in trans-border demand to the U.S.
• Investors should note the valuation metric of 3.5x projected 2026 EV/EBITDA, using it as a benchmark to evaluate the stock's potential against the C$25 target and its industry peers.
• Consider the easing of U.S.-Canada trade tensions and favorable FX conditions as key macro factors that could provide sustained support for the airline's profitability.