FAA Signals Good News For Boeing (BA), as Investors Look for Resumption of 737 Service to Boost the Stock


Boeing’s (BA) fortunes may have turned.

The company is working on getting its 737 Max back in the air after two crashes that killed more than 300 people within a six month period grounded the fleet worldwide. Though there isn’t a concrete timetable for the return of the airplane, the company received good news from the FAA last Thursday. During a meeting between US and foreign regulatory agencies, FAA officials said the 737 Max may be able to resume domestic flight in late June, which, if true, would help in also convincing foreign countries from lifting the ban, too.

On the news, Morgan Stanley analyst Rajeev Lalwani is keeping with his Overweight rating and $500 price target, which implies nearly 40% upside from current levels. (To watch Lalwani’s track record, click here)

Lalwani says the FAA meeting didn’t produce concrete answers, but overall he “viewed the meeting as supportive,” since it showed the Boeing has not experienced any major setbacks, while the FAA and other regulatory agencies across the world are working together (though the analyst says “timetables are not synced”).

The best piece of news for Boeing is that they did not take a step back. Lalwani says comments coming from the meeting show  “a degree of progress was being made around understanding the causes of the accident,” as well as to upgrading the software and engagement between the company and regulatory agencies.   

But not only that, the meeting with the FAA consisted of representatives from over 30 foreign countries, a show of  collaboration that will only help Boeing. While not all countries are operating on the same timeline, Lalwani believes the countries are sharing information with each other, which will keep these countries on the same page and make for gradual, worldwide rollout.

All in all, Boeing’s 737 is the best-selling aircraft in history, and the Max is its latest addition. Airlines are opting more for a 737-like aircrafts (including the Airbus a320) for domestic and short- to mid-range routes, as these planes are most efficient these routes. Once the Max is back in the air, many expect Boeing’s stock to rise as manufacturing will rise and demand will resume. TipRanks analysis of 22 analyst ratings shows a consensus Moderate Buy rating; 12 analysts are Buying, while eight are Holding and two Selling. The average price target among these analysts stand at $421.61, which represents a 18% upside from its current level. (See BA’s price targets and analyst ratings on TipRanks)

 

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