Today should have gone much better than it did for aerospace company Boeing (BA), which saw its shares slip modestly despite a new deal with the U.S. Air Force. However, a major problem may be emerging at the worst possible time, representing a ticking time bomb for Boeing to address.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
The good news for the day was a new deal between the Air Force and Boeing on a new jet prototype. The prototype in question, known as the E-7, is a “battle management aircraft” that is intended to replace the Airborne Warning and Control System, or AWACS. The contract’s terms, meanwhile, aren’t yet set but should be concluded within a month. This also demonstrates that Boeing’s government contracts should hold out despite the recent guilty pleas.
The E-7, also known as the Wedgetail, is actually currently in service in Australia, and reports have been quite positive so far. Boeing is now working to make deals with several other friendly nations to help bring variants of the E-7 to their operations, which is a good sign. But there’s a problem lurking in the background.
Can Boeing Even Make the Jets?
That’s the elephant in the room. Boeing can make all the deals it likes, but it has to be able to actually produce aircraft in order to get anywhere. With production caps still in place from the Federal Aviation Administration, it will take a while before Boeing can actually generate income from these deals. Furthermore, things are becoming worse.
Boeing is losing an average of $1 billion per month as a series of half-constructed planes await parts. The partially completed models are currently sitting in employee parking lots, waiting for new components to arrive and be added in order to complete them. This will make Boeing’s upcoming labor negotiations extra difficult; Boeing needs all hands on deck, but it might not be able to afford them.
Is Boeing Stock a Buy, Sell, or Hold?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on BA stock based on 16 Buys, five Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After a 17.85% loss in its share price over the past year, the average BA price target of $215.84 per share implies 21.62% upside potential.
