‘Time to Move to the Sidelines,’ Says Bank of America About Boeing Stock

These are troubled times for Boeing (NYSE:BA), but then again, when aren’t they?

The A&D giant has been in the hot seat once again since a cabin panel blew off midair during an Alaska Airlines MAX 9 jet flight earlier this month. Following that incident, the U.S. Federal Aviation Administration (FAA) temporarily grounded 171 aircraft for safety inspections. Subsequently, the FAA imposed production limits on the 737 MAX, preventing the company from expanding its current production levels.

These developments raise concerns about Boeing’s targets, as highlighted by Bank of America analyst Ronald Epstein. He stated, “The subsequent grounding and FAA mandated production rate freeze at current levels will likely prevent Boeing from reaching its 2025/2026 production, delivery, and FCF goals outlined during its 2022 investor day,” said the analyst. “We expect the FAA ruling to delay BA’s 737 ramp by roughly a year.”

While Epstein calls the current situation “not tenable,” he actually thinks the forced slowdown will ultimately be advantageous for Boeing in the future. It will give BA, its suppliers, and regulators the opportunity to prioritize quality assurance and implement top-notch production practices without the pressure of rapidly increasing production in the short term. “In our view,” adds Epstein, “the resulting stronger production system should ultimately allow Boeing to ramp up to higher rates smoothly.”

The strong demand backdrop, combined with original equipment manufacturers (OEMs) facing challenges in fulfilling customer orders should allow Boeing to keep on reaping the rewards of its, albeit, diminishing share in the global duopoly for commercial aircraft.

Still, there are downward revisions here. Epstein has lowered his 2024 EPS estimate from $2.70 to $0.25 and his 2025 forecast to $6.35 from the prior $7.45.

Consequently, Epstein has downgraded Boeing shares from a Buy to a Neutral rating, with a revised price target of $225, down from $255. This new target allows for potential 12-month returns of 12%. (To watch Epstein’s track record, click here)

Shifting our attention to the broader market sentiment, the average price target remains higher, standing at $269.20, indicating a potential 34.5% increase in the stock’s value in the coming months. Rating wise, based on a mix of 17 Buys and 6 Holds, the analyst consensus rates the stock a Moderate Buy. (See Boeing stock forecast)

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