Bombardier, Inc.: EgyptAir Intends to Buy up to 24 CS300s — Time to Buy?

Bombardier, Inc. (TSX:BBD.B) stock appears to have turned a corner. Should investors buy after recent positive developments?

| More on:

Bombardier, Inc. (TSX:BBD.B) is a scary stock to own, but for investors who’ve had the stomachs to hang on to shares over the past two years have been rewarded, as their shares have more than doubled in value during this time span.

Like marijuana stocks, Bombardier is a speculative holding, whose stock price will be heavily influenced by the headlines. That means a tonne of volatility can be expected as traders jump in and out of the stock at a ridiculous rate. In addition, the company has a poor reputation and a management team that has a tendency to disappoint prospective clients and investors on a consistent basis.

If you’re fine with making a speculative bet on an extremely high-risk stock, then you’re probably wondering if now’s a good time to reconsider Bombardier following Airbus’s 50.01% investment in the CSeries program — a project that has been a major cause for concern over the past few years.

The vote of confidence from Airbus makes Bombardier an easier-to-stomach stock today, especially since the company was backed in to a corner following many negative headlines in the past.

There’s no question that Airbus is getting a great deal, but I also think that Bombardier shareholders, management, as well as Canadian taxpayers are breathing a sigh of relief, since Airbus will be bringing its expertise, which will likely unlock the full potential behind the CSeries — something that I don’t think Bombardier could have done on its own. With Airbus on board, I think prospective clients may start coming in at a quicker rate over the next year.

More recently, EgyptAir sent Bombardier a letter of intent to purchase up to 24 CS300 aircraft. An order of 12 jets valued at ~US$1.1 billion, with purchase rights to 12 additional jets. Bombardier had been speaking with EgyptAir for many months prior to the deal being announced to the public.

Bombardier now has announced ~43 letters of intent for its CSeries jets, and going forward, this could pick up, while the company ramps up its aircraft production rate over the next few years. Management currently expects 90-120 jets to be produced per year by 2020.

Bottom line

Bombardier stock appears to be back in the upward trajectory, but the company isn’t even close to being out of the woods yet. If the company can clean up its act and actually deliver without issues consistently, the stock could surge over the next few years. And if it can’t, the stock will likely fall off another cliff.

Although there have been several positive developments of late, I’d still recommend avoiding the stock, because I believe the risks are much greater than the potential rewards.

Stay smart. Stay hungry. Stay Foolish.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any stocks mentioned.  

More on Investing

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »

edit Woman in skates works on laptop
Dividend Stocks

3 No-Brainer Stocks to Buy Under $30

These three stocks all offer a huge deal for investors looking for dividends, as well as growth that will last.

Read more »

Business man on stock market financial trade indicator background.
Tech Stocks

1 Growth Stock Down 50 Percent to Buy Right Now

There are plenty of growth stocks in the market worth considering, but Shopify (TSX:SHOP) looks like one of the best…

Read more »

You Should Know This
Dividend Stocks

How to Convert a $300 Monthly Investment Into $338 in Monthly Income

If you want a certain amount in monthly passive income, invest a similar amount today and leave the rest to…

Read more »

Increasing yield
Dividend Stocks

3 Income Stocks With Big Yields to Consider in April 2024

If you haven’t yet made your March investments, here are three income stocks to buy the dip and lock in…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

RRSP Investors: Don’t Miss Out on This Contribution Hack!

This hack has so many benefits for you -- not just when you put it in your RRSP but for…

Read more »

edit Sale sign, value, discount
Stocks for Beginners

These 3 Growth Stocks Are on Sale and Set to Surge

Some growth stocks are on sale right now that offer massive long-term potential for investors. Here's a trio to consider…

Read more »