A Boeing 737 MAX 10 jet takes off in Washington state.
Ellen Banner-Pool/Getty Images
Boeing stock needs all the help it can get, but although it looks as if the aerospace company has picked up a new backer on Wall Street, it hasn’t.
Thursday evening, RBC analyst Ken Herbert launched coverage of Boeing (ticker: BA) with a Buy. “Cyclical tailwinds offset near term headwinds,” wrote Herbert. His target for the stock price is $275.
Boeing stock is getting only a marginal boost, even though Herbert’s target is almost 30% above where the shares trade. In premarket trading, it was up about 0.3%, at about $215 a share, while futures on the S&P 500 and Dow Jones Industrial Average were up about 0.1% and 0.2%, respectively.
The problem is that Herbert came over to RBC from another firm. He recently wrote research at Canaccord, where he also rated Boeing shares at Buy. His price target was $275 as recently as April.
Herbert feels about the same way about Boeing as he did a few months back. That isn’t bad news for Boeing shareholders, but it makes the stock reaction look sensible.
The cyclical tailwinds Herbert is talking about are factors such as deliveries of 737 MAX deliveries and rising orders for jets, coming out of the pandemic period when airlines were ordering few new planes, if any.
The MAX was grounded worldwide between March 2019 and November 2020 after two deadly crashes tied back to malfunctioning software. Boeing spent billions building jets it couldn’t deliver over that span. Now, with deliveries ramping back up, Herbert says the MAX will be a big source of free cash flow in 2022 and 2023.
The outlook for the entire industry is looking up, a bit, after pandemic. Herbert points out that Boeing has logged about 700 net new orders in 2021 compared with fewer than 200 in 2020.
Over the past month, U.S. air traffic was down about 23% compared with prepandemic 2019. A month ago, traffic was about 24% lower than in 2019.
Coming into Friday, Boeing stock was just about flat year to date. Shares are down about 23% from their March 52-week high of almost $279 a share because the spike in Covid infections caused by the Delta variant reduced investors’ optimism about the global recovery in commercial aerospace.
With Herbert’s Buy rating added back in, 59% of analysts covering the stock rate shares at Buy. The average Buy-rating ratio for stocks in the S&P is about 55%. The average price target for Boeing among analysts is about $272 a share.
Write to Al Root at [email protected]
