The COVID-19 pandemic was not the first major event to knock down Spirit AeroSystems Inc.’s (SPR) stock price. About a year prior, the Boeing Company’s (BA) 737MAX narrow body airplane was grounded worldwide due to faulty internal mechanisms. SPR is the company that makes the fuselage structures for this model aircraft.
However, many countries began recertifying the model in November 2020, the same month the Pfizer (PFE) BioNTech (BTNX) vaccine rollout was announced. The stock price has been steadily recovering since. (See Spirit AeroSystems stock charts on TipRanks)
Explaining his bullish sentiment on the company is Cai Rumohr of Cowen & Co., who wrote that regarding the eventual global recovery of the 737MAX saga, Spirit AeroSystems, as the world’s paramount aerostructures supplier, stands to gain the most.
The four-star rated analyst maintained a Buy rating on the stock and raised his price target from $60 to $70 on a more positive outlook. This target reflects a possible 12-month upside of 39.30% from Monday’s closing price of $50.25
Rumohr explained that as long as business and travel trends continue in their current paces, SPR could be looking at three times the 737MAX sales rates for the year than what was seen in 2020. Furthermore, investors are eager to see China recertify the aircraft model, as the country represents about 25% of the backlog.
Beyond the 737MAX factor, SPR has been diversifying its revenue streams by winning defense contracts for military aircraft. Rumohr elaborated that by actively seeking these business streams, Spirit AeroSystems hopes to limit its exposure to Boeing’s ability, or lack thereof, to sell planes.
Additionally, the analyst noted several productivity initiatives recently made by SPR, including dedicated factories for individual fuselage pieces and a fully automated new warehouse. Rumohr expects these changes to increase margins for the company.
So far, it looks like pent up demand for leisure travel is getting ready to bring the industry and its air traffic back to a semblance of normalcy. On the other hand, this new trend is counterbalanced by a lack of business travelers. That segment is likely to remain at home or to opt not to fly for work.
On TipRanks, SPR has an analyst rating consensus of Moderate Buy, based on 5 Buy and 2 Hold ratings. The average analyst Spirit AeroSystems price target is $55.14, suggesting a potential 12-month upside of 9.73%.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
