We are now into 2020’s final quarter and signs the aviation industry’s miserable year might be on the cusp of a turnaround are few and far between.
On Tuesday, A&D giant Boeing (BA) reduced its long-term forecast for commercial jet demand. Specifically, Boeing cut its demand expectations by 11% from 2019’s forecast, estimating that over the next decade, it will now deliver 18,350 commercial airplanes.
The latest news adds to an ever-expanding list of setbacks this year. 2020 has witnessed cancelations on the deliveries of its commercial aircrafts, woeful earnings, reports of 787 Dreamliner manufacturing issues and a damning verdict by Congress for the design flaws behind the twofatal crashes of Boeing's grounded jetliner, the 737 Max.
While BA cut its delivery estimates, Credit Suisse analyst Robert Spingarn has also been looking at BA’s prospects in a world beyond the pandemic. The 5-star analyst rejigged the company’s FCF trajectory by 2024 “to spark discussion within the investor base about the post-crisis cash profitability of the business.”
So, is it time to buy into the BA story? Spingarn prefers to stay on the sidelines as most of his hypothetical upside may have been already priced in.
“With two years of scar tissue,” Spingarn said, “We believe that long-only investors will remain wary of shares for some time until the company can prove it is on the right path—both financially and culturally. Thus, though the stock could potentially have upward room here on $18.50/sh in FCF potential (and positive N/T catalysts from Max reinstatement and vaccine news), we believe that the stock will resist upward rerating given these factors as well as others, including financial leverage, proven financial fragility, risk of future development issues, and terminal value uncertainty”
To this end, Spingarn reiterates a Neutral (i.e. Hold) rating on BA shares along with a $184 price target, which implies a 12% upside potential from current levels. (To watch Spingarn’s track record, click here)
Now let’s see what the rest of the Street has in mind for the beleaguered aviation giant. Based on 8 Buys and Holds, each, and 1 Sell, the stock has a Moderate Buy consensus rating. The analysts expect shares to appreciate by 18% over the coming months, given the $189.25 average price target. (See BA stock analysis on TipRanks)
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