By Senad Karaahmetovic
Shares of Boeing (NYSE:BA) are down almost 1% in pre-open Wednesday after Credit Suisse analysts initiated research coverage with an Underperform rating and a $98 per share price target.
The analyst argues that Boeing is on “the wrong side of a zero-sum” thesis. He argues that Boeing will remain "heavily challenged" in its attempts to sell aircraft into China.
"This creates a difficult situation for BA given that the stock historically trades on orders. While some may argue that market needs may take priority in this situation—ultimately resulting in a recovery in order flow—we note that market access restrictions on BA can be partially alleviated by increased reliance on Airbus, with the remaining capacity shortfall helping support domestic demand for the C919," the analysts said in a client note.
Credit Suisse's estimates are significantly below the Street as the analysts argue the market is "far too optimistic on BDS profitability."
"While there may be potential upside to our estimates if our thesis on China order flow proves incorrect, we think these earnings warrant a permanently lower multiple given their long-term sustainability and terminal value contribution," the analysts concluded.
Separately, Boeing announced it received 96 gross new aircraft orders and 6 cancellations for the month of September. The company also delivered 51 aircraft last month, including 36 737-MAX.
Goldman Sachs analysts said orders were "solid." The analyst believes the full-year target of 400 deliveries remains "in reach."
"We expect to see a continued recovery in air traffic and desire for more fuel efficient aircraft driving continued solid order activity moving ahead... While supply chain remains a challenge, we expect MAX deliveries to accelerate, and see 787 deliveries continuing above the production rate."