The Zhitong Finance App notes that Boeing (BA.US)'s efforts to reverse the decline in business are being warmly applauded by Wall Street — this week, analysts' interest in the company reached its highest level in nearly four years.
After Argus Research Corp. and BNP Paribas raised ratings one after another in just 10 days, the ratio of “buy” recommendations received by the aircraft manufacturer in its overall rating reached the highest level since October 2022 on Tuesday. None of the 32 analysts followed suggested selling the stock.
Tigress Financial's chief investment officer and research director Evan Versace said, “After years of struggle, this is Boeing's time to shine.” Vanseth also gave the stock a “buy” rating and gave Wall Street's highest target price of $305.
Analysts' optimism comes as Boeing received the long-awaited certification of its 737 Max 7 jet from the US Federal Aviation Administration (FAA) last week — a lengthy process of almost a decade overshadowed by two fatal crashes and quality flaws. The company's chief operating officer Stephanie Pope called it “a critical moment for Boeing's recovery.”
Boeing's “Buy” Rating Reaches Highest Level Since October 2022
Boeing's stock price has generally remained the same this year, rising only about 6%, while the general market jumped 13% over the same period. Its biggest competitor, Airbus SE (Airbus SE), shares listed in Paris rose about 8% over the same period.
Meanwhile, the trading valuation of Boeing shares — about 1.7 times the next 12 months' revenue — is 1.5 times higher than the 10-year average.
All in all, investors who have been tested over the past few years are still cautious. From a series of plane crashes, to the COVID-19 pandemic, which almost brought air travel to a standstill, to the incident where the door panel burst and fell off during an aerial flight, Boeing stumbled forward in the midst of the crisis, and its stock has become a classic “let me see the evidence” story, and the road to recovery often seems precarious.
However, market sentiment slowly began to change over the past year, eventually prompting Matthew Ax, the only French and Palestinian analyst who previously gave the stock an equivalent “sell” rating, to surrender last week and give the stock one of the highest target prices. “Boeing's post-pandemic uncertainty era is over,” he said.
Exes also anticipates that after “falling too deep,” the market's consensus expectations for Boeing's free cash flow will begin to rise, and believes that the stock has the potential to nearly double from current levels by 2030.
Meanwhile, Argus analyst Christina Ruggeri, who upgraded the stock rating from “hold” to “buy” on Tuesday, said it was based on the expectation that production would experience a meaningful climb.
Most importantly, as one of the global aircraft manufacturing oligarchs along with Airbus, Boeing is ready to fully benefit from years of boom in global commercial aircraft demand and growing defense spending. Just last month, the company reported strong results, with free cash flow significantly higher than expected.
Joe Gilbert, portfolio manager at Integrity Asset Management, said, “The market has been waiting for proof points at the execution level, and these signals are already beginning to show.”
Boeing's stock price is still below its pre-pandemic peak
Despite recent upsurge in optimism, Boeing's stock price still has a long way to go before hitting a record high of $440.62 in March 2019. Since then, the stock has fallen by nearly 50%, while the S&P 500 index rose by about 180%, the Dow Jones Industrial Average doubled, and Airbus shares rose nearly 90% during the same period.
According to the data, analysts expect Boeing to report about $2.44 billion in free cash flow this year, compared to $13.6 billion in 2018. Similarly, the company expects a loss of 83 cents per share, compared to earnings of $16.01 per share in 2018.
Despite this, analysts and investors say the early signs of recovery are unquestionable.
Eric Deaton, president and managing director of Wealth Alliance, said, “It may be too early to call it a 'new era', but the shift in momentum is obvious.” “After a few really difficult years, the company's momentum has turned positive this year.”