Boeing Stock (NYSE:BA)
Boeing (NYSE:BA) did not have a lot of time to make its argument to a single person who was still on the fence.
Chicago, Illinois is home to the headquarters of the international aerospace conglomerate known as Boeing. It is one of the world’s largest aircraft manufacturers and is well-known for being a leader in the development of innovative aviation technologies. Nonetheless, recent occurrences have taken their toll on the reputation of the organization as well as its financial success. The outlook of Boeing Company was lowered in a new rating that was issued on March 22, 2023, which resulted in a decline in the stock price of Boeing.
Chris Olin, an analyst at Northcoast, initiated research on the aircraft manufacturer’s stock less than three weeks ago and has since lowered his rating on the company’s stock from Hold to Sell. His objective price for each share is $180.
On Tuesday, the same day that Olin was scheduled to start his new job, shares of Boeing (NYSE:BA) were trading 2.5% down, at $210.07 per share. Both the S&P 500 (SPX, -0.61%) and the Dow Jones Industrial Average (DJIA, -0.60%) lost 0.6% of their value.
The production problems that Boeing is having were one of the primary concerns expressed by Morningstar’s downgrading of the company’s rating. The 737 Max in particular has been in such high demand that the company has been having trouble keeping up with supply and demand. The production delays have caused customers to cancel their orders, which has resulted in the company losing income.
Problems with production have been traced back to a wide range of causes, including disruptions in the supply chain, labor shortages, and quality control challenges. The pandemic caused by COVID-19 has also had a substantial influence on the capacities of production at the company. Because of the epidemic, worldwide supply networks have been interrupted, and labor shortages have resulted. Both of these factors make it difficult for Boeing to maintain its production schedules.
The persistent problems experienced by the 737 Max aircraft were another element that had a role in the rating being lowered. In 2018 and 2019, the Boeing 737 Max was involved in two separate fatal accidents, which ultimately led to the worldwide grounding of the aircraft. The accidents were brought on by a malfunctioning automated system that Boeing had installed on the airplanes, which was the root cause.
Since then, Boeing has made a number of modifications to the aircraft and has collaborated with regulatory agencies to ensure that it is safe. Despite this, the Boeing 737 Max has not yet been granted complete regulatory approval in a few countries, including China. Both Boeing’s reputation and its financial performance have suffered severe setbacks as a direct result of the ongoing problems with the 737 Max.
Olin made the adjustment because he was concerned about the timetable that Boeing had set for production. This year, the business is projected to supply approximately 570 aircraft, which is an increase from the 480 jets delivered in 2017. In 2018, it delivered 806 jets, which was the year before the 737 MAX was stopped worldwide as a result of two tragic crashes or the 2020 Covid-19 pandemic.
An increase in manufacturing rates is required in order for Boeing to resume delivering 800 planes. Olin believes that reaching that amount will not be a simple task because there are still shortages in the aerospace supply chain. There is now a shortage of some engine parts, for example.
In the coming weeks and months, investors will be keeping a careful eye on production. On Thursday, the stock increased by almost 2% when Stan Deal, the CEO of Boeing’s commercial jets division, stated that the production rate of the 737 MAX would increase “soon.”
The fact that Olin has downgraded Boeing stock does not alter the fact that 61% of analysts covering the company rank the stock as Buy. The percentage of analysts who recommend purchasing stock as part of the S&P 500 index is, on average, 58%. According to FactSet, there are currently two analysts who have a Sell rating on the stock. The ratio of stocks in the S&P 500 that have a sell rating is, on average, 7%.
The consensus price objective among market analysts is currently $232, which is approximately $20 higher than recent prices.
Recently, Boeing has suffered the loss of a few bulls. According to FactSet, at the beginning of the year, twenty analysts gave the shares a Buy rating. The current total is seventeen.
The transitions are taking place despite the fact that shares have increased. Over the course of the past year, the stock price has increased by 11%. The S&P 500 index has dropped by 10%. The investors’ bets have been placed on a recovery in the number of deliveries.
The Path Forward for Boeing
Concerns have been voiced over Boeing’s future as a result of the drop in its credit rating, as well as ongoing problems with manufacturing and the 737 Max. The company is up against substantial obstacles, which will necessitate the development of original solutions in order to be overcome. Despite this, there are a number of reasons to have a positive outlook for the company’s future.
To begin, Boeing has an extensive track record of invention and has remained at the vanguard of advances in aviation technology for many decades. The organization is equipped, both in terms of resources and expertise, to triumph over the difficulties it is presently experiencing. Also, in the next years, it is anticipated that the demand for air travel will continue to increase around the world, which will fuel demand for aircraft manufactured by Boeing.
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