On Wednesday, Wolfe Research adjusted its outlook on Boeing Co (NYSE:BA), reducing the aerospace giant's price target from $270 to $260 while reaffirming an Outperform rating. The move reflects a reassessment of the company's near-term prospects in light of recent events and market performance.
Boeing's stock has experienced a significant decline, falling 30% this year, a stark contrast to the S&P 500's 8.5% increase. This downturn is largely attributed to the fallout from an incident in early January, when a door plug was blown out on an Alaska Airlines flight, leading to increased scrutiny and uncertainty for the aircraft manufacturer.
The revised price target is based on approximately 18 times Wolfe Research's 2025 free cash flow (FCF) per share estimate of $14.27, a slight decrease from the previous estimate of $14.78. This equates to an estimated total FCF of around $9 billion, slightly above the consensus. Despite the adjustment, the firm maintains a positive outlook, citing a potential 40% upside to the new target.
Historically, Boeing's shares have traded at a forward FCF multiple ranging from 10 to 18 times, with an average of approximately 14 to 15 times, before the pandemic. The current valuation places Boeing at around 23 times the firm's 2024 FCF estimate and approximately 13 times the 2025 estimate. Wolfe Research justifies the higher multiple at the upper end of the historical range due to the market's premium and Boeing's anticipated strong cash flow growth extending into 2026 and beyond.
The firm's stance on Boeing could change if the company does not accelerate aircraft deliveries or encounters further significant production issues within its commercial programs. Additionally, any new problems with defense programs could also impact the company's cash flow performance negatively.
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