Boeing Analyst: 'Negative Value' Isn't Based On Any Facts

Boeing Co's BA stock has lost more than 60% since the start of 2020 but to suggest its valuation is a "negative value" isn't based on any facts, according to BofA Securities analyst Ronald Epstein.

What Happened

If one were to assign a zero valuation to Boeing's commercial aircraft business, the reset of the portfolio including defense and services still warrants a valuation of $100, depending on what multiple is assigned, Epstein said Tuesday on CNBC. So the concept of a "negative value" for Boeing's stock "doesn't make sense."

Meanwhile, looking at Boeing's balance sheet reveals $23 billion in liquidity, or $32 billion of Boeing doesn't proceed with the Embraer deal, he said. The defense business adds another $3 to $4 billion on top.

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Why It's Important

Boeing has around 400 737 planes sitting idly and there is the possibility the planes won't be delivered to clients who cancel the order. If Boeing has to reimburse every airline, the pre-delivery payment it would only result in a cost of $7 billion.

"If you look at what Boeing has on their balance sheet for a rainy day, it's actually pretty significant," the analyst said.

What's Next

Looking forward, Boeing will need to deal with two clients in the global aviation business: those who want to cancel deliveries and those who want to renegotiate deliveries.

On a short-term basis, 25% of Boeing's deliveries are "at risk" amid coronavirus concerns he said. Over the longer-term, this should ease as the world will resume traveling.

Boeing's stock traded around $120 per share at time of publication.

Photo by Steve Lynes via Wikimedia.