BlackBerry vs. Bombardier: Which TSX Stock Is a Better Buy?

Bombardier and BlackBerry are two beaten-down TSX stocks that have trailed the broader market in the past decade.

| More on:
Young woman sat at laptop by a window

Image source: Getty Images.

While the TSX index is trading near record highs, shares of BlackBerry (TSX:BB) and Bombardier (TSX:BBD.B) have trailed the broader markets by a wide margin. Over the years, the two beaten-down TSX stocks have wrestled with narrowing sales and profit margins, forcing them to exit multiple business segments and focus on streamlining operations.

So, let’s see which TSX stock is a better buy right now, given their depressed valuation.

Is Bombardier stock a good buy right now?

Valued at $7 billion by market cap, Bombardier stock has more than tripled investors returns in the last three years. Despite these outsized gains, BBD stock trades 89% below all-time highs.

In the first quarter (Q1) of 2024, Bombardier reported revenue of $1.3 billion, an increase of 13% year over year as it delivered 20 aircraft. The company expects to deliver between 150 and 155 aircraft by the end of 2024. Bombardier sold 60% more jets in Q1 compared to the year-ago period, ending the quarter with a backlog of $14.9 billion.

Its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) was $205 million, indicating a margin of 16%, while adjusted earnings per share stood at $0.36 in the March quarter.

The Canadian manufacturer is focused on growing recurring income streams and backlog while reducing balance sheet debt. Bombardier expects to end 2025 with revenue of $9 billion, adjusted EBITDA of $1.625 billion, and a free cash flow of $900 million. A positive free cash flow will allow Bombardier to reinvest in growth projects and lower debt levels, driving future cash flows higher.

Bombardier’s Services business has increased revenue by 77% since 2020 due to the expansion of its service center network and enhanced customer support offerings. With a rapidly growing fleet of aircraft in service, Bombardier is ahead of its plan to grow service revenue to $2 billion by 2025.

The company is also eying growth in the pre-owned market, which might help it increase annual sales by $1 billion by 2030.

Priced at 12.5 times forward earnings, BBD stock is quite cheap, given earnings are forecast to rise by 80% in the next two years.

Is BlackBerry stock undervalued?

In fiscal 2024, BlackBerry reported revenue of US$853 million, of which US$218 million was associated with the sale of its legacy patent portfolio. It now expects revenue to range between US$589 million and US$616 million in fiscal 2025.

BlackBerry ended fiscal Q4 of 2024 with revenue of $173 million, as IoT (Internet of Things) sales were up 25% to $66 million. Comparatively, cybersecurity sales rose 5% to $92 million, indicating the company continues to lose market share in this rapidly expanding market.

While growth rates for cybersecurity companies have decelerated in recent quarters, peers such as CrowdStrike and Palo Alto Networks continue to grow sales by double-digit percentages year over year amid a challenging macro environment.

Moreover, BlackBerry is forecast to report an adjusted loss of $0.05 per share in fiscal 2025, compared to earnings of $0.07 per share in 2024. Investing in a tech stock that is unable to grow its sales or earnings consistently is a high-risk strategy, given there are many other companies you can buy that enjoy better financials.

The Foolish takeaway

Bombardier seems to be a much better investment today, given its improving financials, revenue visibility, and earnings expansion. However, BlackBerry continues to wrestle with competition from established players and a volatile earnings base.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends CrowdStrike and Palo Alto Networks. The Motley Fool has a disclosure policy.

More on Tech Stocks

Overhead shot of young adults using technology at a table
Tech Stocks

Missed Out on Nvidia Stock? Buy Celestica Stock Instead

Nvidia stock (NASDAQ:NVDA) has certainly been the heavy hitter of 2023 and 2024, but this stock has grown even more…

Read more »

A small flower grows out of a concrete crack.
Tech Stocks

Is Nvidia the Next Stock Split?

Nvidia (NASDAQ:NVDA) may announce a stock split ahead of Constellation Software (TSX:CSU) stock. Here why you should care.

Read more »

telehealth stocks
Tech Stocks

Is it Too Late to Buy Well Health Stock?

Well Health stock remains below $4, but as they keep beating records and the focus shifts to even higher returns,…

Read more »

Concept of big data flow, analysis, and visualizing complex information for artificial intelligence
Tech Stocks

Like Nvidia Stock But Prefer ETFs? This Is the Best Semiconductor ETF to Invest in Artificial Intelligence (AI) 

If you’re looking to get into semiconductor stocks, SMH ETF is a great option.

Read more »

stock data
Tech Stocks

Where Will BlackBerry Stock Be in 1 Year?

Despite short-term uncertainties due to macroeconomic challenges, these factors make BlackBerry an amazing long-term investment right now.

Read more »

Online shopping
Tech Stocks

Shopify Stock Dropped 21% After Earnings: What Investors Need to Know

Shopify (TSX:SHOP) stock fell as much as 21% after earnings, with a weak outlook for the second quarter. But honestly,…

Read more »

edit Businessman using calculator next to laptop
Tech Stocks

Is it Too Late to Buy BlackBerry Stock?

Trading near $4 per share again, there might be more upside to BlackBerry (TSX:BB) stock that investors can capture by…

Read more »

exchange traded funds
Dividend Stocks

How to Build the Perfect Portfolio With Just $50

Looking to invest but don't have much? Even just $50 can make a huge difference, especially when investing in these…

Read more »