Boeing (NYSE:BA) stock appears to be gathering momentum. Since bottoming out toward the end of October, the shares have skyrocketed ~40%.
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That performance is a reflection of a shift in sentiment toward the aerospace sector, says RBC’s Ken Herbert. “There is widespread confidence in the aerospace cycle, and the stocks, including BA, have benefited from this improved sentiment over 4Q23,” the 5-star analyst explained.
The numbers tell a similar story. Throughout November, led by 677 orders for the MAX and 284 for the 787, BA has booked 1,115 orders, improving on the 910 and 937 gross orders seen in 2021 and 2022, respectively.
Moreover, the IATA’s recently updated outlook for 2024 factors in airline industry profitability of $26 billion, an increase on 2023’s $23 billion. Additionally, 2024 RPKs (revenue passenger kilometers) are expected to rise by 9.8% with flights forecasted to increase by 9.0%. “While a more significant decline in the pace of air travel growth in 2024 is possible (which could limit multiple expansion), we see limited risk to BA’s delivery outlook,” notes Herbert.
Which brings us to BA’s current delivery schedule. Herbert expects November deliveries for the 737 MAX will reach 48 (from a total of 59 total per Cirium). That is some distance above the ~32 MAX deliveries in September-October, meaning the A&D giant has some catching up to do to reach its full year delivery target of 375-400 737s, although Herbert is “incrementally more confident” BA will now be able to do so.
While Herbert notes that MAX deliveries have been volatile, being able to reset to more than 35/month throughout the first half of next year will be “positive for the stock,” and should provide support for the “improved execution narrative.”
With the recent share gains, the conversation now includes talk of BA’s valuation. That is a positive, says the analyst. “We see a path to the prior pandemic BA stock price high of ~$270 on the back of 4Q23 results and strong 4Q23 MAX deliveries, the initial 2024 guide, and the potential resumption of MAX deliveries to China,” Herbert summed up.
Herbert’s actual price target is slightly above that pre-pandemic milestone; at $275, the figure makes room for additional returns of 10% from current levels. Herbert’s rating stays at Outperform (i.e., Buy). (To watch Herbert’s track record, click here)
There are plenty of other positive BA reviews coming out of Wall Street right now; based on a mix of 16 Buys against 3 Holds, the analyst consensus rates the stock a Strong Buy. However, going by the $255 average target, there’s now only room for modest gains of 5% in the months ahead. (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.
