Transat Loss Widens in Q2, Revenues Plummet; Stock Pops More Than 4%

Transat AT (TRZ) stock jumped more than 4% in early trading Thursday, despite the company reporting meager revenues and a larger loss in the second quarter compared to the year-ago period.

Revenues dropped in Q2 2021 to C$7.6 million from C$571.3 million in Q2 2020. Travel sales were hit by restrictions on international travel and government-imposed quarantine measures.

Meanwhile, net loss attributable to shareholders amounted to C$69.6 million (C$1.84 per diluted share) for the quarter ended April 30, compared to a loss of C$179.5 million (C$4.76 per diluted share) in the prior-year quarter. On an adjusted basis, Transat lost C$103.3 million (C$2.74 per share) for the quarter, compared to a loss of C$38.8 million (C$1.03 per share) a year ago.

The Montreal-based international tourism company specializing in vacation travel expects to resume its operations on July 30, following its suspension on January 29.

Transat entered into an agreement with the Government of Canada a few weeks ago to borrow up to C$700 million in additional liquidity, of which C$310 million will be used to reimburse customers.

Transat President and CEO Annick Guérard said, “The financing we secured will allow us to roll out our plan over the coming years. Our strong brand, our employees’ commitment and the transformation we have undertaken and which will continue over the coming years will allow us to position ourselves again as our customers’ favorite leisure travel company and become more profitable than before the pandemic.”

Transat hasn’t provided an outlook for summer 2021. (See Transat AT stock analysis on TipRanks)

Two weeks ago, CIBC analyst Kevin Chiang kept a Sell rating on TRZ while lowering its price target to C$3.00 (from C$4.00). This implies 47% downside potential.

Chiang said Transat’s financial situation may not improve until the summer of 2022 and believes that the return to past profitability will not occur until 2025.

Consensus among analysts is that TRZ is a Moderate Sell based on 1 Hold and 3 Sells. The TRZ average analyst price target of C$3.48 implies 41% downside potential to current levels. Shares have risen approximately 7% year-to-date.