By Sam Boughedda
Bernstein analysts raised the firm's price target on Boeing (NYSE:BA) to $252 from $240, maintaining an Outperform rating on the stock on Tuesday, telling investors in a note that they believe it is still an attractive time to buy the company's shares, despite recent skepticism.
"One year ago, we looked at Boeing as it worked through a range of issues," they said. "Progress has had fits and starts, with the biggest upward moves coming after its Q4 investor conference. We continue to hear skepticism now that shares are more expensive. But, when we examine Boeing's current situation alongside twenty years of history, we still see this as an attractive time to buy."
The analysts state that Boeing has substantially outperformed in three different periods over the last twenty years, and in each of those times, "sentiment was negative, but global airline traffic was rising, the delivery outlook had strong growth, and rising free cash flow was ahead."
"Today, issues remain (e.g., supply chain constraints, market share versus Airbus (EPA:AIR), access to China, high net debt, and (of course) defense). But, as in past positive periods, global airline traffic is rising, the delivery outlook is very strong, and the free cash flow outlook is positive," they added. "Demand is very high, with the 737MAX backlog at 7 times Boeing's projected 2025 delivery rate and the 787 backlog at almost 5 times its projected 2025 rate."
The analysts also pointed to a positive start in 2023 for Boeing, with the firm estimating that the planemaker delivered 52 737MAX and 7 787s in March, which they believe is strong.
"We raise our 737MAX deliveries for 2023 and project further upside in 2027 (to 63/month), although we slightly delay 787 deliveries due to delays in January and February. We have also assumed a $400mn defense charge on the tanker. Assuming that Boeing has turned the corner on the two major commercial programs, we expect the stock to follow sharply rising cash flows. We expect the majority of debt to be paid down over the next three years," they concluded.