This Could Be HUGE for Bombardier Stock
I hope that readers have been following our coverage of Bombardier, Inc. (TSE:BBD.B). Better yet, those who have been reading considered the analysis and bought some shares when we insisted that Bombardier stock would emerge quickly from its $0.77-per-share phase last February.
To those who bought Bombardier stock then: congratulations, you have more than doubled up, as Bombardier opened about 12% higher today at $1.77 per share. In fact, investors in Bombardier may be seeing some even better news, as the company may have found a way to get $6.0 billion in revenue—and it’s not from government subsidies.
Bombardier stock has made the long-expected move up on the chart thanks to a jolt from Delta Air Lines, Inc. (NYSE:DAL). Delta, the second-largest U.S. carrier, is about to place a major “C Series” order with Bombardier. (Source: “Bombardier Near Deal to Sell Up to 125 Jetliners to Delta,” The Wall Street Journal, April 14, 2016.)
Not to brag (ok, just a little) but if you were following our analysis, you would have known about the Delta prospects almost two months ago, when many analysts were writing Bombardier off as a penny stock. (See: “Bombardier Stock: This $1 Stock Is Set to Soar.”)
Indeed, Bombardier stock started to move up on Thursday afternoon as rumors of the deal started to spread. The Wall Street Journal reported that Delta was finalizing an order for 75 C Series aircraft worth more than $6.0 billion, according to current prices. The contract will provide options for 50 more aircraft and will be the largest order to date for the new family of Bombardier aircraft.
The deal, which should be signed by the end of April, could provide the catalyst that Bombardier was expecting for the C Series, attracting more interest from other airlines in North America and beyond. The order of 125 planes will send a signal to the market that Bombardier will have a firm basis to deliver the C Series aircraft family in the long term.
Indeed, the order from Delta makes Bombardier a veritable alternative to Airbus and Boeing in the 100–150-seat mid-range market. Delta has the reputation of being a strategic aircraft buyer. The fact that Delta is ordering the C Series adds much credibility, in addition to $6.0 billion, to Bombardier’s coffers.
Some industry sources also indicate that part of the contract may include the “CS500,” a stretched version of the C Series that can carry up to 180 passengers. Bombardier has not officially launched this version. (Source: “Can Bombardier extend CS300 to a CS500?” Leeham News, April 14, 2016.) The CS500 would compete against Boeing’s latest “737” and Airbus’s “A320” families.
Bombardier has already won over major customers like Lufthansa and Air Canada for the C Series. Yet the size and scope of Delta’s order outweighs both. Delta, incidentally, was one of the main buyers of Bombardier’s “CRJ” regional jets, which were a major commercial hit.
The Bottom Line on Bombardier Stock
The significance of the Delta order is that until now, no major U.S. airline had ordered the C Series. This was one of the main obstacles to sales. Now, the program can take stride and the order books for the Canadian-made planes should start to fill up at a much faster rate.
It also helped Bombardier that Delta delivered better-than-expected quarterly results as low fuel prices more than offset lower revenue.