A Boeing 777X aircraft performs a demonstration flight at the 2021 Dubai Airshow.
GIUSEPPE CACACE/AFP/Getty Images
Boeing has a problem, according to Citi analyst Charles Armitage. It isn’t the 737 MAX, which was grounded worldwide for almost two years, or the 787, which isn’t being delivered right now as Boeing fixes manufacturing issues. It isn’t even Covid-19, which has hurt demand for global air travel. Boeing’s new problem is market share.
Armitage worried that the 50-50 duopoly in the commercial aerospace market has been upended by Boeing’s recent troubles and that Boeing (ticker: BA) can only expect to capture 40% to 45% of the market for large commercial jets in the future with the balance going to Airbus (AIR.France). He just doesn’t see Boeing’s market share recovering anytime soon.
“Our long-term forecast suggests Boeing has lost its [two] decade ~50% share of the commercial airliner market,” wrote the analyst in a report. He expects Boeing will have roughly 43% of the overall market. That’s made up of about 35% of the market for single-aisle jets and 55% of the market for wide-body jets.
A 787 is a twin-aisle, or wide-body jet. Boeing has historically had more of the market for wide-bodies than Airbus. Along with the popular 787, Boeing will launch an updated version of the 777 in coming years.
A 737 MAX is a single aisle, or narrow-body jet. That jet was grounded after two deadly crashes inside of five months. The MAX woes aren’t the reason Armitage sees lower market share.
Airbus has relatively new A220 and A321 jets that are tough competitors to Boeing offerings. Of course, Boeing could develop a new plane, a little larger the 737 MAX to swing market share back in its direction. A new jet has been suggested by industry and Wall Street analysts, but Boeing hasn’t made a decision yet.
As a result of his more bearish outlook, Armitage dropped his Boeing price target to $219 a share from $238. He rates Boeing stock the equivalent of Hold.
His peers aren’t nearly as bearish. About 71% of analysts now covering Boeing stock rate shares Buy. A year ago, about 52% of analysts covering Boeing stock rate shares Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%.
The average analyst price target for Boeing stock is about $264, up about 28% from recent levels. A year ago, the average analyst price target for Boeing stock was about $230 a share.
Boeing stock, however, hasn’t really reacted to Wall Street’s increasingly positive sentiment. The stock down about 1% over the past year. The S&P 500 and Dow Jones Industrial Average are up about 16% and 13%, respectively, over the same span.
Investors might be waiting for a new jet.
Write to Al Root at [email protected]
