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Bombardier stock: some analysts see upside in bailout

Inside a full scale model interior of a Bombardier CSeries. Byron Capital analyst Tom Astle says the company's commercial aircraft business has been a drag on overall valuation, but may be improved by it recent deal with the Commercial Aircraft Corporation of China.
Inside a full scale model interior of a Bombardier CSeries. Byron Capital analyst Tom Astle says the company's commercial aircraft business has been a drag on overall valuation, but may be improved by it recent deal with the Commercial Aircraft Corporation of China.
Inside a full scale model interior of a Bombardier CSeries. Byron Capital analyst Tom Astle says the company’s commercial aircraft business has been a drag on overall valuation, but may be improved by it recent deal with the Commercial Aircraft Corporation of China.

Its stock chart resembles a modestly difficult ski run, but some analysts think the worst is over at Bombardier (Bombardier Stock Quote, Chart, News: TSX:BBD.B).

On Wednesday, Scotiabank raised its rating on Bombardier from “underperform” to “sector perform” and increased its one-year price target from $1.00 to $1.75.

The following day, Goldman Sachs raised its rating to “neutral”. Its target of $1.26 is slightly below Thursday’s closing price of $1.33.

The moves follow on a report more than a month ago from Credit Suisse First Boston, which raised its rating from “negative” to “outperform” and hiked its one-year target from $1.64 to $1.90.

But before one goes thinking that Wall Street or Bay Street is about to throw a party for the embattled aerospace giant, note that just 27 per cent of analysts currently rate the stock a “Buy”.

Much of the positive rerating of Bombardier has to do with the potential for a billion dollar bailout the company has requested from the Canadian government.

ScotiaBank analyst Turan Quettawala no doubt echoes the views of many on the street. The analyst believes the troubled CSeries might be better managed by a a separate entity consisting of federal and provincial operators. He sees some near term upside from the company having the seemingly ill-fated planes off the balance sheet.

The aerospace industry in Canada is responsible for thousands upon thousands of jobs and they’re exactly the kind of high-quality, innovative jobs that are deeply linked to the knowledge economy we need to continue to build on,” said Trudeau. “That’s why we’re looking very seriously at the possible support for Bombardier.

“While we are not Bombardier bulls due to our fundamental view, we think that there may be near-term upside to the shares post this restructuring,” he said in his recent report.

A billion dollar federal government bailout would match the one the Quebec government made to the firm a year ago.

One person who was sounding a little more upbeat about the Quebec-based company was Canadian Prime Minister Justin Trudeau. In Toronto last week to talk about his party’s inaugural budget, the Toronto Star reported that the young PM instead “found himself making a sales pitch” for Bombardier.

“The CSeries jet is an exceptional jet that is going to show Canadian innovation and quality manufacturing to the world,” he said. “That’s why it’s important to make sure that the Canadian aerospace industry is strong, not just in the short term, but in the medium and long term.”

With resource prices continuing to struggle, the bailout (one that is being dubbed “Bailout 3.0”) of Bombardier might make sense image-wise for Trudeau’s government, which has constantly talked up the value of Canada’s innovations sector.

“The aerospace industry in Canada is responsible for thousands upon thousands of jobs and they’re exactly the kind of high-quality, innovative jobs that are deeply linked to the knowledge economy we need to continue to build on,” said Trudeau. “That’s why we’re looking very seriously at the possible support for Bombardier.”

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  1. It was never included in the Budget but the Bombardier Bail Out is a done deal. This Government is as transparent as a lump of coal.

  2. Technically, Bombardier’s problems are behind it. It’s in an order filling stage. Hopefully a little help from the federal government will ease the financial side. Need restructuring on its management. Its stock should perform well from here. I see a technical bump to the upside.

  3. Trudeau talks pro BBD as expected of a Canadian company, but how do you know its a done deal

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