We have a potential of a $300 stock here RBC produce a Foundation Report and include an Income Statement Estimate out to 2030.
For 2024E they have revenue of $8.5B and EPS of $4.11.
So, what is interesting is that 2030E they have revenue of $11.1B and EPS of $15.09.
If you take a P/E of 20 the share price could reach $300.
BBD is becoming a cash machine with FCF story ahead.
We have a potential of $300 stock here. Could be more. Here is report summary:
RBC One Year Price Target CAD 133.00
Our Outperform rating reflects the following key 3 points:
1. Solid near-term demand backdrop expected in our view to support meaningful inflection in FCF. We are calling for FCF to inflect meaningfully by 2025E to >$900MM. We expect higher FCF to be driven by better operating margins, lower interest costs, and decreased working capital investment. Key is that we believe the current business jet demand environment will support production at targeted 2024/2025 levels setting the stage in our view for Bombardier to execute on its near-term strategy and therefore achieve its 2025 targets
2. Defense, CPO, and Services set the stage out to 2030. While we see a near-term inflection in FCF as key to our investment thesis, we also believe the market is not appreciating Defense, CPO, and Services opportunities longer-term. We note that the company has guided to $1B opportunities in both Defense and CPO, which we believe sets the stage for GDP-plus revenue growth out to 2030. We also see further opportunity to grow Services on the back of an increasing fleet size and expanded network. Key is that we estimate each of Defense, CPO, and Services have EBITDA margins of >20% providing a platform for significant operating leverage longer-term.
3. Bombardier has changed; why we believe the shares will re-rate higher. The operational improvements and recent deleveraging since 2021, as well as upside levers discussed above, makes us question whether the 45% valuation discount to peers is entirely appropriate. We believe shares are primed for a re-rating given solid execution, debt reduction, and FCF growth, all of which we expect to over time erase the historical valuation hangover.
Good luck to all
Snowey