Should You Buy Bombardier While It's Below $100?

Should You Buy Bombardier While It’s Below $100?

Bombardier stock price has dipped below $100 amid the market correction in December. Is this a good entry point?

Puja Tayal

Author Bio

Puja Tayal grew up in a small-business family where dinner conversations often centred on working capital and savings. Her early experiences with investing, particularly during the 2008 financial crisis, shaped her approach to understanding markets and evaluating investment opportunities. She began her career at a mutual fund company before moving into investor education and financial writing for asset and wealth management firms. Before joining The Motley Fool, Puja wrote for Market Realist, where she extensively covered the semiconductor industry. Her published work has also appeared in The Indian Express. Puja believes every stock has a story that can help investors understand its potential returns. She combines business analysis with different investing approaches to help investors make informed decisions and align their portfolios with their long-term financial goals. Outside of finance, Puja enjoys long drives, catching up with friends, watching superhero and science-fiction movies, and managing her family portfolio. She also has a keen interest in artificial intelligence and its potential to reshape the world.

Education

Bachelor's degree in Accounting and Finance, University of Mumbai (2007)
CFA Level I

Areas of Expertise

Qualitative company analysis, management strategy, risk assessment, long-term investing, portfolio diversification and rebalancing, dividend reinvestment, cyclical growth opportunities, compounding strategies, growth stocks, and dividend stocks.

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Favorite Investment Quote

"Risk comes from not knowing what you're doing." — Warren Buffett

Published December 31, 2024 8:30 pm EST

Bombardier (TSX: BBD.B) stock fell 9.3% as the TSX corrected in December. The stock market has been trending downward as the outlook for 2025 is mixed. The interest rate cuts investors expected in 2025 might not be the same if U.S. President-elect Donald Trump imposes import tariffs. However, the December market correction has created an opportunity to buy stocks like Bombardier with significant growth potential. Between April 22 and May 22, 2024, Bombardier stock jumped 60% to $91 as the company presented its medium-term growth plans on its Investor Day 2024.

A airplane sits on a runway. — Source: Getty Images

Bombardier outlook for 2025

The business jet maker has been beating its outlook since its turnaround began in 2020 under CEO Eric Martel. Although the growth rate is expected to stabilize in 2026, Bombardier is on track to meet its 2025 objective of growing its revenue by 12.5% to US$9 billion. Driving this growth will be Global 8000 large cabin aircraft that will come into service in 2025. A strong order backlog of US$14.7 billion hints that the company can meet its $9 billion revenue target.

The company also aims to increase its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) by 32% to US$1.6 billion. It plans to improve profitability by increasing its revenue share in high-margin after-sales service and pre-owned aircraft segments.

Bombardier is also looking to reduce its net debt to 2.0-2.5 times the adjusted EBITDA by 2025 from 3.3 times in 2023. It can achieve these targets by increasing EBITDA and paying off more debt.

The multi-year losses have accumulated tax attributes of US$12 billion, which could help Bombardier earn higher profits for the next few years. However, its revenue growth could slow from double-digit to high-single-digits beyond 2025.

The fourth quarter of 2024

Bombardier has a strong outlook with good earnings potential, a strong balance sheet, and robust execution by the management. Meanwhile, Bombardier is on track to deliver 40% of its total deliveries for 2024 in the fourth quarter. The business jet maker estimated 150 deliveries for 2024, of which it delivered 89 aircraft till the third quarter. This means 61 aircraft deliveries are scheduled for the fourth quarter, double the aircraft delivered in the third quarter.

We could expect revenue of US$2.7 billion in the fourth quarter, compared to US$1.5 billion in the third quarter. This revenue could offset the negative operating cash flow of the third quarter because of high inventory costs and trade payables to execute the delivery of 61 aircraft in the fourth quarter.

When Bombardier releases its fourth-quarter earnings in February, its stock could cross $100.

Should you hold Bombardier stock for the long term?

Bombardier’s management is considering partnerships and acquisitions to grow in the future. BBD.B stock is considering dividends and share buybacks beyond 2025. The realistic target, product roadmap, and strong execution make Bombardier a stock to buy and hold till 2030. It has the potential to give you market-beating returns.