Don’t Go Bargain Hunting on Boeing Stock Quite Yet, Says 5-Star Analyst

Boeing (BA) is once again in the headlines. A congressional report released on Wednesday has blamed BA along with the FAA (Federal Aviation Administration) for the design flaws behind the two fatal crashes of Boeing’s grounded jetliner, the 737 Max.

The scathing verdict is the latest addition to Boeing’s 2020 woes. Following the pandemic’s onset, Boeing appeared on the verge of bankruptcy, only to pull back from the edge. The decimation of the airline industry, however, has seen cancelations on the deliveries of its commercial aircrafts. Add in a predictable yet still woeful Q2 earnings, and reports of 787 Dreamliner manufacturing issues and it all looks very grim for the A&D giant.

The Max findings come at a time when Boeing is nearing the completion of test flights to bring the jetliner back into circulation.

The recent conclusion of EASA (European Union Aviation Safety Agency) test flights paves the way for the JOEB (Joint Operations Evaluation Board) assessment by the FAA, EASA, Transport Canada, & Brazil.

Cowen analyst Cai Rumohr anticipates the process will take about four weeks. Following which, the FAA will examine all data with the possibility of certification around Thanksgiving and first deliveries before the end of the year.

Rumohr believes BA should be able to deliver most of the 450 inventoried MAXes by the end of 2021, although deliveries in 2022-23 “depend on traffic recovery and could be flat/down.”

So, is the time ripe for investors to start building a position in BA stock?

Not right now. The 5-star analyst says “there’s no urgency to step back in,” and further said, “Increases in MAX and 787 inventories through 2020 should become a source of cash starting in mid-2021 as deliveries recover; but magnitude and timing of the delivery recovery is unclear. This could lead to further downward adjustment of production plans, limiting potential upside until a concrete delivery recovery is in focus.”

Accordingly, Rumohr reiterated a Market Perform on BA shares along with a $150 price target. The implication for investors? Downside of 7%. (To watch Rumohr’s track record, click here)

There is similar sentiment among Rumohr’s colleagues. Based on 7 Buys, 8 Holds and 3 Sells, BA has a Hold consensus rating. There’s more optimism about where the share price is heading, as the average price target hits $186.24, and suggests 15.5% of upside over the next 12 months. (See Boeing stock analysis on TipRanks)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.