I have red the discussions about valuations with interest. Sure, that BBD SP has space to increase. But trying to put a specific value over 200$ for 2024, even 250$ for 2025 ? I understand that you think that that value will be reached with at least a 75% probability ( Flipping a coin has a 50% probability).
I worked with valuations all my life and I learned that most of the time, the more surprising the prediction is, the less likely it is to materialize. Don’t forget that valuations are not facts , only opinions.
In real estate, for example, there are many methods; the reconstruction costs, the comparable method, the cap rate method etc As your discussion is about. Different methods, different results, same goal. All for determining how much a non-constraint buyer would be willing to pay. Hypothesis, real value is told only by the market.
Funny, I follow Air Canada closely and at the beginning of the year, all the analysts had almost the same operational predictions, all in only a 8%-10% difference for revenues, and EBITDA. But the value they gave for these numbers ( targets) were from 17$ to 32$. Almost the same numbers and large different values. Finally, they were all wrong, except the RBC analysts, AC falling and staying all year in the 15-18$ range.
Targets are useful but my focus is elsewhere. They have to be done and put aside after. I think that the analysts' targets are their less useful output. Their analysis of the impact of events on a company, their analysis of their strength and weakness, their analysis of the commercial environment are the prime output.
Bombardier has fundamentally the same niche as it had in 2021, all their strengths it showed at the time were the same as today, good product, clean strategy, strong management and a positive market for bizz jets. Nobody talked of a 110$ SP in 2021, not even me. Yet, here we are 3 years later. Focusing on the health of its niche and of its environment was my driver for investing massively on its shares. Sure, I had some (reachable) targets in mind for the 6-12 months ahead in a range pattern, but my driver was ‘’with such strong fundamentals, the SP recovery is almost certain’’.
The same for now, the growth of revenues and EBITDA for 2025 and possibly for the years after, (according to the strategy disclosed in may) can drive the SP higher. I have a 15%-20% annual SP increase in mind.
Why do long or high predictions almost never materialize? Time is eventful and the stock market is not driven by the mathematical formulas which drive the predictions. The problem with predictions is that they always assume that the current situation will not change, all things staying frozen; no change in the macro economics and forecasts, in the commercial environment of the company and no strategic reactions to these changes by our management..
Look only at the recession or soft landing waltz of the last 3 months. The direction changed 2 times in the last quarter. All predictions begin at the macro level; How can we predict an over 100% appreciation for the SP in the next year with such an unstable environment ? with more than a 50% probability ?
The stock market is driven by sentiment, it does not stick on the numbers, a 20% increase in EPS will not be followed automatically by a 20% increase of SP. The market is always right (but in the long run only), positive results will eventually be followed by a SP appreciation , but with a winding path, by surges and pull-backs, not by math formulas.
We have read many posts expressing frustration about the SP since 2021 on this board. I suspect that they are too stick to price predictions, unable to accept that a 200$ valued company in their view, had such a low SP, missing the others elements. Some SP movements are incomprehensive in our view; but that’s the market. If it would be really predictable, we could not make money with it.
We are set for another year of frustration posts if many believe strongly that the real value of Bombardier (to be realized in the next 15 months) is 200$, 250$ or more..
Does BBD have the potential to be 200$ stock in 2,3 or 4 years? Sure. As long as this bizz jet market is positive, the stock will be able to grow, (execution is not really a problem with BBD); I am there. But my focus is elsewhere; as soon as a slowdown is felt, It could be the end of the party. It is possible that I will significantly reduce my investment., I don’t want to be the last one to quit. So, I enjoy the surges but I am watching for the early signs of a slowdown. I am not in the 250$ target game. My choice.