Bombardier Takes Flight: Undervalued Equity Soars as Transportation Demand Rebounds

The aerospace and defense sector has long been a barometer of global economic health, and Bombardier Inc. (TSX: BBD.B) is now positioned to capitalize on a synchronized recovery in both business aviation and infrastructure spending. Following Scotiabank's July 2025 upgrade to “Sector Outperform,” the Canadian manufacturer has emerged as a compelling investment opportunity, backed by a robust order pipeline, strategic operational improvements, and macroeconomic tailwinds. This analysis dissects the catalysts behind the upgrade and evaluates why Bombardier's valuation remains compelling amid a sector-wide revival.

The Catalyst: A $1.7B Order Ignites Momentum

The linchpin of Bombardier's resurgence is a landmark $1.7-billion order for 50 Challenger and Global aircraft, secured from a first-time fleet customer. This deal not only bolstered the company's backlog visibility through 2028–29 but also marked a critical shift toward recurring revenue streams via a long-term service agreement. Analysts at Scotiabank highlighted the order's immediate impact on free cash flow (FCF), projecting a 20% year-over-year improvement by 2026. The deal's significance extends beyond its financial metrics: it signals renewed confidence in business aviation amid easing trade tensions and rising demand for executive travel.

Macroeconomic Tailwinds: Trade Policy and Transportation Demand

The upgrade also reflects broader sector dynamics. Post-pandemic normalization has driven a surge in business jet utilization rates, with North America's fleet activity hitting pre-2020 levels. Simultaneously, the U.S.-Canada-Mexico Agreement (CUSMA) has eliminated lingering tariff uncertainties, reducing supply chain costs for Bombardier. This clarity is critical for a company reliant on cross-border parts sourcing.

On the defense front, Bombardier's tiltrotor technology and train manufacturing divisions are benefiting from global infrastructure spending. Governments, particularly in North America and Europe, are prioritizing rail modernization, creating a TAM (Total Addressable Market) opportunity estimated at $50 billion over the next decade.

Valuation: A Discounted Gem in a Premium Sector

Scotiabank's price target increase to $150 from $105 underscores Bombardier's undervalued status. At current levels, the stock trades at 8.1x and 7.2x EV/EBITDA for 2025 and 2026, respectively—nearly half the multiples of peers like Dassault Aviation (14x) and Embraer (12x). This gap persists despite Bombardier's stronger FCF trajectory and deleveraging progress.

Investors should note the stock's 21% surge on the day of the upgrade, reflecting pent-up demand. Technical analysts point to a breakout above resistance at $120 as a bullish signal, with the Scotiabank target implying a 30% upside from current prices.

Analyst Sentiment and Operational Execution

Beyond Scotiabank, consensus is building. RBC Capital highlighted Bombardier's “best-in-class” order backlog visibility, while BMO emphasized its success in converting investor tours of its new manufacturing facility into credibility with institutional buyers. Management's focus on cost discipline and service contract diversification—now representing 40% of revenue—adds structural resilience.

Risks and Considerations

No investment is without risk. Persistent inflation could delay infrastructure spending, while geopolitical tensions might reignite trade disputes. Bombardier's reliance on a handful of large customers also introduces concentration risk. However, the company's diversified portfolio—spanning aircraft, rail, and defense—buffers these exposures.

Conclusion: A Strategic Buy for Growth and Value

Bombardier's confluence of catalysts—order momentum, valuation discounts, and macro tailwinds—positions it as a rare growth/value hybrid in today's market. With a price target implying significant upside and a dividend yield of 2.1% (vs. 1.5% sector average), the stock offers asymmetric reward potential. Investors seeking exposure to a rebounding transportation sector should consider accumulating shares, particularly if they believe in a sustained economic recovery and the durability of business aviation demand.

In a world where aerospace stocks are often priced for perfection, Bombardier's undervaluation offers a rare margin of safety. The skies are clearing for this Canadian industrial leader.