Welcome to another day of trouble at aerospace firm Boeing (BA). Wells Fargo downgraded the beleaguered company, and, unsurprisingly, it was not welcome news. In fact, Boeing is down nearly 8% in Tuesday afternoon’s trading as there were very few positive catalysts ahead, as far as Wells Fargo was concerned.
The downgrade came from analyst Matthew Akers, who cut the rating from Equal Weight to Underweight and took the price target down to $119. The cut was hard enough to take by itself, but the investor response was universally unpleasant, and, for a moment, Boeing touched an interday low not seen since November 2022.
Things managed to get worse from there, as Akers noted that free cash flow was likely to peak by 2027, as Boeing’s planned production growth would be offset by the costs of developing aircraft in general. Worse, there was also a possibility of share dilution as Boeing offered fresh shares in a bid to raise cash. Given the production caps and other points that Boeing labors under right now, that is well within the realm of possibility.
And Speaking of Labor…
Labor issues were where the next major stumbling block for Boeing kicked in. The International Association of Machinists, which represents about 32,000 workers at Boeing, has already approved a strike should it become necessary. And with their contract poised to expire September 12 at 11:59 pm Pacific Time, it could be the first strike Boeing has seen in 16 years, according to a CNN report.
Reports note that the chances of a deal going through in the next nine days are not looking good overall, as Boeing and the union are “…far apart…on all the main issues…” ranging from wages to time off. If Boeing loses a large portion of its workforce to a strike, that will be bad enough—even with the production caps—but considering Boeing’s issues of late, it simply may not be able to produce the kind of package the union wants.
Is Boeing a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 13 Buys, four Holds, and two Sells assigned in the past three months, as indicated by the graphic below. After a 28.05% loss in its share price over the past year, the average BA price target of $212.71 per share implies 33.28% upside potential.
