Bombardier launches new jet amid robust demand for private travel
BMO Capital Markets lowered its 12-month price target for Bombardier Inc. on the premise that “high financial leverage and heightened macro uncertainty have weighed on [its] valuation.”
In a note to clients on Sunday, Analyst Fadi Chamoun reduced his price target for the jet maker to $63 from $71. He maintained his outperform rating (the equivalent to a buy).
The stock closed 17.27 per cent lower on Monday to $19.12.
However, Chamoun is still optimistic about Bombardier in the medium-to-long-term, saying once its debt load is lowered, it will improve the company’s risk profile.
“We expect that as leverage is further reduced, the company’s credit profile should become more supportive of accretive re-financing opportunities further lowering interest cost burden and improving free-cash-flow,” Chamoun wrote.
He added that Bombardier’s aircraft backlog “continues to provide strong visibility into production rate increases well into 2024.”
“Demand has continued to be strong in business aviation, with inventories at record lows and flight activities continuing to rise,” Chamoun wrote.
“Service challenges in the commercial aviation market are worsening and likely to face shortages in labour for some time, which will continue to be a source of support for demand in business aviation.”
CONCERNS ON STOCK STRENGTH
Chamoun is not the only analyst who has voiced concerns about the jet maker’s stock recently.
Earlier this month, CIBC Capital Markets Analyst Kevin Chiang lowered his 12-month price target on Bombardier on fears of a potential recession.
“We continue to see [Bombardier] track ahead of its targets while benefiting from healthy industry trends. That said, growing concerns over a recession limit [Bombardier’s] re-rate opportunity,” Chiang wrote in a note to clients dated June 14.
“We maintain our Neutral rating, and our price target goes from $45 (post-consolidation) to $36.”
Bombardier recently implemented a reverse-stock split on June 13, in which the company consolidated its Class A and Class B shares at a 25-to-one ratio after it obtained approval from the board and investors.