Bombardier’s stock market is once again in the doldrums… falling 50% since the beginning of October, when the stock market reached its highest level since the appointment of Éric Martel as CEO of the Beaudoin-Bombardier family multinational.
When Martel took the reins of Bombardier in early April 2020, the shares were trading around 45 cents. Following the company’s restructuring following the sale of Bombardier Transportation to Alstom and the sale of the C Series to Airbus, the stock rallied to $2.28 during the October 4, 2021 session.
Yesterday, the stock closed the session at just $1.13. How to explain a 50% drop in shares when Bombardier appears to be on track to return to profitability with its specialty as a manufacturer of commercial aircraft, including the new Global 8000, the world’s fastest commercial aircraft?
Is it because of the negotiations for the renewal of collective agreements? Or the decision of Bombardier’s board of directors to consolidate the shares at a ratio of 10 to 1 for class A shares and 30 to 1 for class B shares? Or the big stock market correction that is hitting Wall Street hard these days?
You should know that Bombardier’s main market as a business aircraft company is the United States, with 42% of the company’s total sales.
That said, all major aircraft manufacturers’ stocks are showing sharp declines, with the exception of Airbus, which has lost just 10% since October 2021 against Bombardier’s 50% and Embraer and Boeing’s 45%.
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What do the analysts think?
Regardless of the concerns that are driving shareholders to sell their shares in Bombardier in particular, stock market analysts at brokerage firms that closely follow the company are mostly optimistic.
Of the 17 analysts listed by Morningstar, 12 recommend buying Bombardier. This represents 71% of analysts. Regarding the other five, three propose to keep the title. And the remaining two analysts anticipate lower returns, without liquidating the stock.
Analysts most optimistic about Bombardier’s future as one of the world’s leading business jet manufacturers include Desjardins Capital Markets, Benoit Poirier and Michael Kypreos.
They predict a price target of $3.25. Therefore, we are talking here about a potential increase of around 188% compared to the current price!
On what factors are they based to show such optimism about the future of Bombardier? Strong first quarter results reported with revenues of US$1.25 billion and adjusted EBITDA of US$167 million. Forecasts for 2022 are conservative. Management is implementing key initiatives to improve margins. The order book (121 jets) increased sequentially to US$13.5 billion. The services segment reached record levels. The use of business jets continues to grow in the United States and Europe. Continuous debt reduction.
In terms of risks, analysts Poirier and Kypreos point to Bombardier’s high indebtedness ($5.2 billion) and increased competition in the commercial aircraft sector.
But they add in their analysis: “We believe management is on the right track with its key strategic initiatives aimed at increasing margins and revenue while reducing debt. »
Serendipity for leaders
At the current share price ($1.13), Bombardier’s stock market outlook would look promising.
A stroke of luck for Éric Martel and his senior management colleagues. They happen to have just been awarded large blocks of options and subscription rights at a strike price of $1.19. As soon as the share price exceeds this level, you will find yourself in a profitable situation without having taken the slightest risk!
Of the 12.45 million options and subscription rights granted on May 12 to 11 senior Bombardier executives, Éric Martel obtained 3.5 million, including 1 million options at an exercise price of $1.19 and 2, 5 million rights also at the strike price of $1.19.
Éric Martel and his colleagues therefore have a vested interest in seeing the stock rise in the coming years. But it is an illusion to think that Bombardier will one day touch its historical maximum of August 9, 2000, that is, 26.30 dollars per share.
BOMBER IN 2021
- Entry: $7.6 billion
- Direct jobs: 8750
- Indirect jobs: 13,900
- Salary bill: $2.7 billion ($1.8 billion in Quebec)
- Expenses with suppliers: $1.9 billion
- R&D expenses: $150 million
- Exports: 90% of product value
- Contribution to Canadian GDP: $5.7 billion ($4 billion in Quebec)
- Fiscal benefits: $1.1 billion ($717 million in Quebec)
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