Bombardier (TSX: BBD.B) took a massive beating in early trading on Tuesday, falling as much as 7% when markets opened. The reason for the sell-off was obvious to anybody who’d been following the news Monday night: at that time, US President Donald Trump announced that he was planning to ban the sale of Bombardier jets in the US, citing a variety of trade-related complaints that had little to do with Bombardier.
What was interesting about Trump’s attack on Bombardier was that it appeared aimed not at correcting a trade imbalance, but on inflicting as much pain to a specific Canadian company as possible. The US accounts for about 50% of Bombardier’s sales, and Bombardier stock had been struggling for a very long time before starting to recover just a few years ago. The company was not involved in any major trade sticking points such as contributing to Canada’s trade surplus – the US exports far more airplanes to Canada than vice versa. So, Trump’s move appears to have been targeted at Canadian capital markets more than anything else.
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A major sell-off
As mentioned in the introduction, Bombardier stock sold off massively when markets opened on Tuesday, declining 7% in the first hour of trading. As the trading went on, the selling abated somewhat, with the stock down 4.5% at the time of this writing.
The cause behind the sell-off in Bombardier stock was obvious enough: Donald Trump threatened to ban the sale of Bombardier jets in the US. While it’s not clear that the US President actually has the authority to unilaterally enact such a ban, he could use an executive order to trigger one. If he did so, the ban would likely be challenged in court, and it would take many months for an outcome to be reached, as happened with Trump’s April 2025 round of “reciprocal tariffs.”
Potential impacts
If Donald Trump successfully banned Bombardier from selling in the US, then the impacts would likely be severe. The company reportedly does about 50% of its sales to US customers. If all of that business disappeared completely, the company could potentially make it up by selling to other countries eventually, but that would take time. Airplane orders are major commercial transactions that often take many months to finalize.
Bombardier: Valuation and fundamentals
Having explored the potential threat to Bombardier stock, it’s now time to explore how that threat could impact Bombardier’s profitability, growth, and valuation.
Bombardier is currently a fairly profitable company, with a 9.6% net margin and a 12.9% free cash flow [FCF] margin. These profit numbers are unusually high for the airplane manufacturing industry, which is not exceptionally profitable on aggregate. Additionally, BBD.B has been doing quite a bit of compounding over the last three years, with a compound annual growth rate (CAGR) of 10.5% for revenue and 19.8% for earnings in that period. It’s been a pretty good run. However, a blanket ban on selling to the US would immediately reduce Bombardier’s margins and cause its growth to become negative. So, the risks present here are real. At 23 times earnings, Bombardier is a stock I’d tread cautiously with.
