Shares of Bombardier (TSX: BBD.B) have been lagging behind over the last year. Bombardier stock has had a long history of ups and downs, but it seemed as though, during the pandemic, this would come to an end. Focusing on its business jets, the company saw a huge increase in businesses wanting to rent out or purchase the jets during the coronavirus pandemic.
Yet today, things are different. Shares of the company are down 10% year to date, though falling 26% before climbing more recently. Now, shares are up 25% since hitting October lows. So, what should investors do now?
Looking at earnings
Of course, the first spot where Bombardier stock investors should look is at the company’s earnings. During its recent third-quarter report, the company stated it remains on track to hit its full-year guidance. The third quarter saw revenue increase 28% year over year to US$1.9 billion. This came from more deliveries, with its aftermarket business also generating US$414 million. That was 11% more than last year.
Profitability also rose, with adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) up 36% to US$285 million. There was also positive free cash flow at US$80 million, bringing available liquidity to US$1.2 billion.
The company now has a backlog of US$14.7 billion. And with the market rebounding, it proved the perfect time for shares to climb higher. But is it enough?
More aircraft to come
While there is already a massive backlog for Bombardier stock to work through, the company is also working on its submarine hunter aircraft for investors. This would be a militarized version of its successful Global 6500 business jets. However, there is a lot of work to be done.
The government rejected the concept, handing it over to Boeing earlier this year. But Bombardier stock isn’t giving up. In fact, instead of going to Canada, it’s now looking at other countries, according to management, with the same product.
The company is now looking to prove its own government wrong and believes it will eventually come around to Bombardier’s military aircraft. So, after years of the company shrinking down to focus on business jets, it seems it’s now expanding once more. But will it be successful?
Analysts weigh in
The news led to analysts weighing in positively, even if the company doesn’t receive future military support. The company continues to trade in a favourable environment when it comes to the business jet airline industry, with “no clear evidence of a downturn,” one analyst said.
As mentioned, there continues to be an enormous backlog for this and other companies. Therefore, Bombardier stock should continue to be a large beneficiary — especially once interest rates come down and inflation gets under control.
Therefore, when it comes to Bombardier stock, it’s important to focus on what’s going on immediately. And that’s a success story in this case. Bombardier stock is now a “buy” recommendation by analysts, with a price target of around $77 as of writing. That’s a potential upside of 51% as of writing!
