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On Monday, Melius Research upgraded Boeing (NYSE:BA) stock from Hold to Buy, citing several key factors that indicate a positive turn for the aerospace giant. The upgrade is attributed to the effective leadership of CEO Kelly Ortberg, a rapid increase in 737 deliveries following a strike, and a significant contract win for the Air Force’s Next (LON:NXT) Generation Air Dominance (NGAD) program. The stock, currently trading at $178.11, has shown strong momentum with a 10% gain over the past week, though InvestingPro analysis indicates the stock may be overvalued at current levels.
Springarn from Melius highlighted the transformation under CEO Ortberg, who has been in charge for less than a year. Ortberg’s approach to leadership, which includes soliciting candid feedback from employees to drive cultural and operational improvements, has garnered praise from industry partners. The CFO of United Airlines commended Boeing for becoming a more reliable supplier and expressed confidence in the on-time delivery of their MAX aircraft. With a market capitalization of $134 billion, Boeing remains a prominent player in the Aerospace & Defense industry, though InvestingPro data reveals challenges with gross profit margins and overall financial health.
The analyst also pointed out that Boeing’s Defense, Space & Security (BDS) segment is still in need of work, but the recent NGAD contract win is expected to bring in $20 billion in profitable defense sales over the next five years. This victory is anticipated to not only boost employee morale but also help BDS retain top engineering talent. The NGAD production contracts could potentially generate $60 billion in sales over the coming decades, with additional revenue from modernization and sustainment.
Boeing has outperformed expectations with its post-strike 737 ramp-up, with projections to deliver 105 of the aircraft in the first quarter of 2025, surpassing the consensus estimate of 83 deliveries. This suggests that analysts may revise their estimates upward with the release of first-quarter results.
Looking ahead, Melius expects a strong order activity for Boeing at the Paris Air Show in June 2025, which could lead to cash deposits. Additionally, there’s potential for another boost if Boeing secures the Navy’s sixth-gen fighter program (F/A-XX) contract later this year.
Melius has set a new price target for Boeing at $204, up from the previous $189. This valuation is based on a free cash flow (FCF) methodology, targeting a 6% yield on the firm’s 2027 FCF per share estimate of $12.23, which is an increase from the prior estimate of $11.36. Current analyst targets range from $113 to $250, with revenue growth forecast at 27% for FY2025. For deeper insights into Boeing’s valuation and comprehensive financial analysis, including 8 additional ProTips, check out the detailed research available on InvestingPro.
In other recent news, Boeing has secured a contract from the U.S. Air Force to develop the Next-Generation Air Dominance (NGAD) Platform, marking a significant advancement in fighter jet technology. This development underscores Boeing’s longstanding legacy in combat aircraft production. Additionally, Boeing is nearing a $32.7 billion deal with Korean Air for new planes and GE Aerospace engines, highlighting ongoing international partnerships. Malaysia Aviation Group has also announced plans to purchase 30 Boeing 737 aircraft for delivery in 2029, emphasizing Boeing’s role in global aviation fleet modernization.
JPMorgan has reaffirmed its Overweight rating for Boeing stock, maintaining a $200 price target, citing operational progress as a key factor for the company’s success. The financial institution noted Boeing’s substantial backlog and potential for strong operational performance despite recent market challenges. Meanwhile, Lockheed Martin (NYSE:LMT) and Boeing are awaiting a major announcement from the White House regarding the next-generation fighter jet contract, with Boeing looking to recover from past setbacks in military contracts. These developments reflect Boeing’s strategic moves in both defense and commercial sectors, shaping its future trajectory in the aerospace industry.
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