Bombardier is still a gamble, this fund manager says

Bombardier’s (Bombardier Inc. Stock Quote, Chart, News: TSX:BBD.B) fortunes may have improved as of late, but don’t expect unlimited growth from the stock, says Michael Decter of LDIC Inc., who argues that the aerospace and transport company remains an investment gamble.

These days, Bombardier’s share price certainly looks better than it did a couple of years ago, when it bottomed out at $0.72 in February of 2016. Now nipping at $5.00, the stock is prompting investors to wonder how much higher can it go.

Maybe not so much more, says Decter, who cautions that the jury is out on the company’s C Series deal with Airbus, which will see the European plane maker take over production of Bombardier’s C Series jetliner, starting July 1.

“We bought [Bombardier stock] a few times and lost our nerve when it did a swan dive. I’ve started to look at it over the last few weeks and I’m starting to see analysts with $6.00 targets on it,” Decter told BNN Bloomberg Monday.

“There are some big, big moving pieces,” says Decter. “One presumes that Airbus knows how to make planes and that they’ll bring some large plane experience to bear, which should be good. How much juice is left in that deal for Bombardier is hard to tell. It’s a great plane but is it a great business?”

Last week, Bombardier lowered its revenue forecast for 2018 even as it said C Series deliveries are expected to double this year. News also broke that Bombardier is launching two new large-cabin business-class planes, the Global 5500 and the Global 6500 aircrafts, as part of the company’s intended pivot towards luxury aircraft and trains.

“I’m cautious,” says Decter. “If I had an average price of $2.50 a share, I would probably start trimming it gently above $5.00 and heavily if it gets above $6.00. I wouldn’t sell it all, but I would take some profits.”