Shares of Bombardier, Inc. (TSX:BBD.B) have tumbled 77% already in 2020 as the transportation company closed last week at a price of just $0.44.
Bombardier’s coming off another disappointing quarter when it released its first-quarter results of 2020 last week. While revenue was up 5% from the prior-year period, the company incurred a loss of $200 million and had used up $1.5 billion in cash flow from its operating activities.
With no one doing much air travel amid the pandemic, demand for Bombardier’s business jets is going to suffer, and that’s one of the few businesses that Bombardier has left these days. Earlier this year, the company announced it was selling its rail business so that it could focus on business aviation – which now looks like a colossal mistake.
With airline stocks tanking and it potentially being years for demand for air travel to get back to where it was in 2019, stocks like Bombardier that are dependent on aviation are in for a rough ride during this pandemic.
While it may be attractive to buy the stock given that it’s near its 52-week low, there’s just too much risk that Bombardier’s facing today.
Declining revenue and more losses and cash burn to come make this one of the worst stocks to buy right now. There’s little reason to expect a turnaround to happen. The company doesn’t have the diversification that it once had in its operations and that could end up being its undoing.
Bombardier had plenty of problems to worry about before the pandemic, and now, COVID-19 puts the company into an even more perilous situation.
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