Market Overview

Boeing Is Feeling The Pressure

Boeing Is Feeling The Pressure

Boeing Co (NYSE: BA) announced it will lower production of its 737 Max 8 planes from 52 units per month to 42 per month.

BofA No Longer A Bull

Bank of America's Ronald Epstein downgraded Boeing's stock from Neutral to Buy with a price target lowered from $480 to $420. The analyst says "reputational loss" from the two recent fatal crashes involving 737 MAX 8 planes could impact its long-term market share and pricing power.

Over the near term, the company's production drop is likely to last six to nine months which is longer than the initial three month to six-month the research firm initially expected, CNBC quoted the analyst as saying. This will impact financials, including margins as the company may be forced to pay penalties to customers along with operational inefficiencies from the disruption.

See Also: With 737s Grounded, Raymond James Goes On Standby With Southwest Airlines

Canaccord: Feeling The Pressure

Boeing may have been "relatively slow" in reaction to the fatal Ethiopian Air crash and management is likely feeling more regulatory and political pressure on its planes than it expected, Canaccord Genuity's Ken Herbert wrote in a research report. In fact, management shifted its language recently towards a "much more conciliatory tone."

Herbert says the company's move to lower production to 42 units a month likely implies it's keeping the option to return towards full production as soon as possible. As such, its production cut is likely "more politically and regulatory motivated" as it's looking to "drive more of the public narrative" after its planes were grounded.

The timing of any progress towards higher production rates remains unclear along with the financial impact from penalties, airline compensation, and higher working investments to support higher rates for suppliers, the analyst also wrote.

Herbert maintains a Hold rating on Boeing with a $380 price target.

Tigress: Buying Opportunity

Investors may want to consider buying Boeing's stock on any weakness as production should return to 52 units per month once any problems are resolved, Tigress Financial Partners' Ivan Feinseth wrote in his daily newsletter. Production could move higher towards 57 planes per month by the end of 2019 on track towards management's goal of 62 planes a month next year.

Feinseth says Boeing's backlog for plane demand extends 20 years and continues to grow. As such, "significant upside exists in the stock" from current levels and should be viewed as a buying opportunity.

Price Action

Boeing traded lower by more than 5 percent to $372.10 per share Monday morning.

Photo credit: pjs2005 from Hampshire

Latest Ratings for BA

Sep 2020Morgan StanleyInitiates Coverage OnUnderweight
Jul 2020RBC CapitalMaintainsOutperform
Jul 2020Wolfe ResearchDowngradesPeer PerformUnderperform

View More Analyst Ratings for BA
View the Latest Analyst Ratings


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