Bombardier Soars on Tariff Relief and Analyst Optimism: A New Era in Aerospace?

The aerospace sector has long been a battleground of geopolitical tensions, supply chain hurdles, and razor-thin margins. Yet Bombardier Inc. (TSX: BBD.B) now stands at a pivotal moment, with analysts and investors alike revising their outlooks upward as the company navigates these challenges with renewed clarity. Recent tariff resolutions, a landmark $1.7 billion aircraft order, and a string of analyst upgrades have positioned Bombardier as a compelling play on both value and growth.

Tariff Resolution: A Lifeline for Business Jets

The resolution of U.S. tariffs under the U.S.-Mexico-Canada Agreement (USMCA) has been a game-changer. Bombardier's aircraft, now tariff-free for U.S. exports, no longer face the 25% levies that once clouded its profitability. This shift is critical: U.S. sales account for 60% of Bombardier's revenue, and the company's 2,800 U.S. suppliers ensure compliance with USMCA's “rules of origin.”

Analysts at Scotiabank highlighted this clarity in their July 2 upgrade, raising their price target to CAD 150, a 43% premium to prior estimates. The tariff reprieve has also reinvigorated demand, with CEO Éric Martel noting that post-pandemic business jet utilization rates have rebounded to pre-2020 levels.

Operational Turnaround: From Burn to Black

Bombardier's operational improvements are equally compelling. First-quarter 2025 results showed a 19% revenue surge to CAD 1.5 billion, driven by 23 aircraft deliveries—a three-unit increase over 2024—and record services revenue of CAD 495 million. Adjusted EBITDA rose 21% to CAD 248 million, while free cash flow improved 21% year-over-year, signaling progress toward its CAD 500–800 million free cash flow target for 2025.

The $1.7 billion order for 50 Challenger and Global aircraft, secured in June 2025, is a linchpin. It adds $15.9 billion to the backlog and includes a long-term service agreement, which analysts at BMO Capital Markets argue will boost recurring revenue and free cash flow by 20% year-over-year by 2026.

Analyst Optimism: A Buying Opportunity or Bubble?

The analyst community has been bullish, with upgrades from Scotiabank, TD Securities, and BMO lifting the consensus price target to CAD 130—but some see further upside. National Bank's Fadi Chamoun argues that Bombardier's valuation remains undervalued at 8.1x 2025 EV/EBITDA, compared to peers like Dassault Aviation (14x) and Embraer (12x).

However, risks linger. Inflation could pressure margins, and Bombardier's reliance on engine suppliers—already causing production delays—remains a vulnerability. Still, the company's deleveraging strategy (targeting net leverage below 2.5x by 2026) and diversification into high-margin services (now 25% of revenue) offer safeguards.

Strategic Bet: Defense and the Next Generation

Bombardier's pivot to defense and next-generation aircraft is another growth lever. Its collaboration with Leonardo on the Global 6500 maritime aircraft—a first in its premium segment—opens a $50 billion market for tiltrotor and defense systems. Meanwhile, the Global 8000, its new ultra-long-range jet, is on track for certification in 2025, positioning the company to capture demand from ultra-high-net-worth buyers.

Investment Thesis: Buy the Dip, but Mind the Risks

Bombardier's combination of tariff clarity, operational efficiency, and analyst backing makes it a compelling investment. At current prices, the stock trades at a 2.1% dividend yield and offers a 30% upside to Scotiabank's CAD 150 target. Investors should, however, remain cautious about geopolitical headwinds and supply chain bottlenecks.

Final Analysis

Bombardier's resurgence is no accident. By mastering USMCA compliance, locking in long-term contracts, and focusing on margin-heavy services, it has transformed from a turnaround story to a growth play. While valuation multiples remain conservative relative to peers, the path to CAD 150—or beyond—is plausible. For investors seeking exposure to a revitalized aerospace sector, Bombardier offers a rare blend of value and upside—provided they can stomach near-term volatility.

Investment advice: Consider a gradual entry into Bombardier's stock, with a stop-loss below recent lows, as macroeconomic conditions stabilize.