Boeing Drops 7% On Trimmed Aircraft Demand Outlook

Shares of Boeing plunged 6.8% on Tuesday after the airplane manufacturer lowered its long-term forecast for commercial aircraft demand citing continued significant challenges due to the COVID-19 pandemic.

Boeing (BA) now predicts global airlines would need 18,350 commercial airplanes valued at about $2.9 trillion over the next decade, an 11% reduction from its 2019 projections. The company also forecasts that the total market value for aerospace products and services demand over the next 10 years would decline to $8.5 trillion from the $8.7 trillion expected last year.

Boeing said that “Airlines globally have begun to recover from a greater than 90% decline in passenger traffic and revenue early this year, but a full recovery will take years.” (See BA stock analysis on TipRanks)

In addition, the aerospace giant trimmed its rolling 20-year forecast for commercial aircraft demand. The company projects a delivery of 43,110 commercial airplanes globally over the next two decades, down 2% from its 2019 estimates of 44,040 aircraft.

On Oct. 6, Credit Suisse analyst Robert Spingarn raised the stock’s price target to $184 (15.3% upside potential) from $154 saying that “there could be some near-term opportunity for shares given the catalyst path (MAX ungrounding, potential vaccine/therapeutic progress).”

However, Spingarn reiterated a Hold rating citing multiple downside risks including “increased financial leverage, proven fragility, an increased likelihood of future development issues (due to mass layoffs—the same occurred on 787 post 9/11 layoffs), and increased uncertainty regarding the company’s terminal value.”

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 8 Buys, 8 Holds and 1 Sell. With shares down nearly 49% year-to-date, the average price target of $189.25 implies upside potential of about 18.6% to current levels.