Boeing (BA) stock is easy to give up on, with the seemingly never-ending list of manufacturing challenges. Undoubtedly, the 737 MAX debacle that initially pushed the plane maker off a cliff was enough to reason to steer clear.
After recent news of issues with the 787 Dreamliner, many may be inclined to question the capability of management under the leadership of CEO David Calhoun.
While the COVID-19 pandemic was an unavoidable obstacle for Boeing, it’s the two serious company-specific production issues (with the 737 MAX and 787 Dreamliner) that have many questioning the long-term value proposition from the troubled firm amid the latest round of sales cuts.
Indeed, there’s a lot of pessimism surrounding the company, and some amount of reputational damage that will be tough to recover from. The headlines have almost been all negatives lately.
Still, down 25.8% from its 52-week high, and 53.7% from its all-time high, there remain many reasons to get behind the stock, as the last round of investors begin throwing in the towel on the way down.
Despite recent pressures and the potential for increased scrutiny by the FAA, I remain bullish on Boeing shares, as they look to touch down with 52-week lows in the $200 range. It’s a great contrarian reopening stock, with much of the issues already mostly baked in here. (See Insiders’ Hot Stocks on TipRanks)
Vote of Confidence
In a rare bit of good news, RBC Capital analyst Kenneth Herbert recently initiated coverage of BA stock with a Buy rating and a lofty $275 price target. Herbert sees increasing deliveries as a potential driver factor behind a potential rally.
With most investors focused on the negatives, RBC Capital highlights one of the most compelling contrarian cases for getting behind the stock as it continues its descent towards the $200 mark.
Undoubtedly, there aren’t many plane makers to pick from. Boeing is in a duopolistic market such that any serious issues or delays are likely to be forgiven or forgotten by prospective customers.
In any case, investors remain fearful that clients can just switch to the second player in the space. Rival Airbus (EADSF) stands to benefit from Boeing’s ongoing company-specific manufacturing issues.
Airbus stock has outpaced Boeing considerably since bottoming out earlier last year, but just how long will this last, as Boeing devotes all, if not most, of its efforts to fix its widely publicized problems?
The Contrarian Case for Boeing
Boeing’s management deserves criticism. There is no excuse for the 737 MAX debacle, and this latest 787 Dreamliner “nightmare” isn’t helping the company get out of its tailspin.
Still, the likeliest scenario is that Boeing makes the right fixes and moves on from what could become a forgettable past three years.
From a longer-term macro perspective, things still look good as the company looks to re-earn public trust to win the business of airlines. Higher jet fuel costs and the increased importance of ESG factors are also likely to drive demand for new, more fuel-efficient aircraft.
If Boeing can move on and make the fixes it needs to make, long-lived secular tailwinds may very well begin taking the space of today’s very well-known headwinds. Undoubtedly, China also remains a potential driver of long-term secular tailwinds, making BA stock a very compelling long-term value play for investors who have the patience.
In the meantime, there are clouds of uncertainty ahead, as 787 deliveries add to what’s likely to be a messy next few months. For those willing to look past the dark clouds of today, though, there could be a much clearer view on the other end.
Wall Street’s Take
According to TipRanks’ analyst rating consensus, BA stock comes in as a Moderate Buy. Out of 14 analyst ratings, there are nine Buy recommendations, and four Hold recommendations.
The average Boeing price target is $275.67. Analyst price targets range from a low of $220 per share, to a high of $306 per share.
Disclosure: Joey Frenette owned shares of Boeing at the time of publication.
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