The TSX Composite Index fell a sharp 9.7% after Trump imposed tariffs on all U.S. trade partners from April 2. Many countries will impose reciprocal tariffs. These tariffs could increase the cost for companies that have global supply chains. The aerospace, automotive, and semiconductor industries are heavily dependent on their global supply chain, leading to a sharp drop in their share prices.
However, some goods will be exempt from tariffs or will have a lower impact on tariffs. Bombardier (TSX:BBD.B) is one such stock that may be affected by tariffs but has a plan to mitigate their impact.
Three reasons to invest in Bombardier in April
Business jet maker Bombardier’s stock price has corrected 27.6% since the December 2024 dip. More corrections could come as CEO Eric Martel has clearly stated that the company will face the impact of tariffs. Martel is worried about the US$465 million order from the United States Air Force for eight Bombardier jets. The tariffs could increase the cost or delay delivery.
1. Bombardier gets tariff exemption
However, the White House clarified on April 4 that goods under the United States-Mexico-Canada Agreement (USMCA) will be exempted from tariffs. Bombardier jets fall under the USMCA agreement, removing the uncertainty. Despite the clarity, Bombardier stock has not yet recovered from the 12.5% dip between April 2 and 4.
Even if the US President changes his mind and imposes tariffs on USMCA, Bombardier has a plan B of prioritizing the delivery of planes to its non-U.S. clients until the tariff situation eases.
2. Bombardier on track to launch Global 8000 aircraft
While the tariff situation keeps most manufacturers on their toes, Bombardier remains on track to bring into service its next-generation Global 8000 aircraft in 2025. The tariffs did not disrupt its supply chain. The new aircraft will be Bombardier’s fastest and longest-range purpose-built business aircraft and attract orders and higher prices.
3. Secular demand remains intact
In the meantime, Bombardier continues to secure aircraft orders from non-US clients. It secured an order for two Challenger 650 aircraft for Intelligence, Surveillance, and Reconnaissance (ISR) missions in Australia.
Bombardier delayed its 2025 guidance on tariff vows. Now, the company will release its first quarter earnings and Investor Day on May 1, shedding some light on the tariff impact. The short-term headwinds could slow revenue growth. However, its robust balance sheet with no debt maturities till 2026 gives the business jet maker the financial flexibility to withstand temporary headwinds.
Even Eric Martel is of the view that tariffs are temporary. Unless they are prolonged, Bombardier’s business can sustain its secular growth.
What can investors expect from Bombardier in the long term?
Bombardier’s long-term secular growth remains intact. The company will continue to earn regular cash flow from after-sales service. The business jet deliveries could normalize to 150 aircraft per year in the long term. And all the jets coming into service could be maintained by Bombardier through its after-sales service. The owners of older business jets could resell them to Bombardier. The aircraft maker will refurbish these pre-owned aircraft and sell them.
Moreover, Bombardier is leveraging existing platforms of Challenger and Global for defense applications, relieving the company from developing a new aircraft platform design from scratch. These long-term growth drivers could reduce Bombardier’s dependence on new orders and diversify revenue streams.
How to invest in this stock
Bombardier stock is a value buy at $77.60 as it has the potential to surge past $100, representing a 29% upside only from a recovery rally. The stock could dip further throughout the year if the tariff situation worsens and fears of recession materialize. Instead of delaying buying the stock, you could buy stocks worth $500 at every dip and reduce your average cost.
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