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Bombardier shareholders should prepare for a turbulent ride in the next 12 months according to RBC Capital Markets.
Heightened competition from Boeing and Airbus, mixed with a growing risk of delays at much anticipated CSeries line of aircraft, will act as a drag on Bombardier’s shares, analyst Walter Spracklin said in a research note to clients on Friday.
Spracklin lowered his rating on Bombardier shares to ‘sector perform’ from ‘outperform’ and slashed his price target to $7 from $8.50.
RBC says many of their reasons for previously being bullish on the stock—including strong macro conditions and growing jet demand—have already been priced into the shares.
“Going forward, we believe the operating environment (including program execution) and securing new orders for the CSeries will become more challenging,” Spracklin said.
Boeing’s recent decision to offer a new engine option on its 737 will hurt the marketing on the CSeries, which is being billed as the fuel efficient answer to higher fuel costs, according to RBC.
“The decision to re-engine the 737 from Boeing will narrow the fuel efficiency gap between the stated 20 percent fuel burn savings offered by Bombardier’s CSeries.”