It has been a rollercoaster month for investors of beleaguered airline Boeing (BA). To recap: the stock dropped during the first three weeks of March all the way down to $95 per share, an amazing loss of 66%. However, last week’s relief rally saw the share price reclaiming 70% of its value. Will the volatility continue? Possibly, as there are currently a wide variable of unknowns concerning the A&D giant’s future.
Nevertheless, Credit Suisse’s Robert Spingarn slashed his price target on Boeing shares to $187 (from $367), which still implies about 23% upside from current levels. Despite the profit potential, the analyst can’t quite see his way clear to actually recommending “buying” BA stock, assigning the shares only a “neutral” rating. (To watch Spingarn’s track record, click here)
Questions have been raised concerning Boeing’s financial health, following a request for $60 billion in federal aid to assist its ailing ecosystem. Last week’s developments, along with the dividend cut and the firm’s latest modeling, leave the 5-star analyst “reasonably confident in BA’s ability to contain near term liquidity/dilution risks.”
The larger concern for Spingarn remains the “highly uncertain landscape for the OE recovery in ‘21+.”
The analyst notes that revenue passenger kilometer (RPK) recovery in H1’21 could be impacted by further COVID-19 mitigation actions. Looking further ahead to H2’21 and beyond, along with a possible reduced demand for business travel due to the rising popularity of video conferencing, the financial impact of the coronavirus on consumers’ leisure spending power could further impact RPK recovery.
And although lower fuel prices could translate into lower ticket prices, offering a counter relief to the aforementioned issues, Spingarn reminds investors that there are further complications. “Low oil improves the unit economics of operating older aircraft, disincentivizing the purchase of new tails. At the same time, MAX delays offer some airlines a contractual escape to cancel orders—a bad combo for BA. And while demand for new aircraft could be challenged for years, the near term nevertheless promises a boost for supply as MAX returns to service. BCA’s end-market could therefore be facing a dual supply/demand shock which may result in an extended period of indigestion and “lower for longer” production rates,” the analyst said.
Among other Street analysts, Boeing currently holds a Moderate Buy consensus rating based on 6 Buys, 13 Holds and 1 Sell. At $211, the average price target promises returns in the shape of 39%, should the figure be met in the months ahead. (See Boeing stock analysis on TipRanks)