Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Boeing's FCF to benefit from high 're-sale values' for undelivered aircraft, analysts raise target

Published 23/01/2023, 14:53
Updated 23/01/2023, 14:53
© Reuters.

© Reuters.

By Vlad Schepkov

Benchmark analysts reiterate a "Buy" rating on Boeing (NYSE:BA) and raised their Price Target to $250 from $200, as they believe "the current environment, where passenger air traffic continues to outpace expectations, coupled with a constrained but improving supply chain, benefits BA’s FCF profile."

In their latest note, the analysts took a positive stance on Boeing's large number of built but undelivered planes, noting "the ability to deliver built but undelivered 737-MAX’s and 787’s provides a smoothing FCF effect while supply chains recover."

They see "market dynamics dictate attractive re-sale values" for those airframes and should provide "upside FCF contribution to BA."

The analysts see an example of such dynamics in the rumored upcoming order by Air India - the company is reportedly about to acquire ~190 737s and ~30 787s). It is estimated that "Air India will look to acquire up to 50 of the Chinese 737-MAX’s that have been sitting on BA runway’s frozen in geopolitics."

These aircraft "in BA’s inventory were likely ordered from BA at significantly lower pricing several years ago when volume discounts were much higher", but due to "limited supply of new aircraft from BA or Airbus, Air India is likely to have to pay near-market values."

The analysts thus believe "the incremental FCF pick up" from this order alone "could outpace Street expectations."

Based on this, the Benchmark analysts believe "FCF will outpace expectations near-term and provide a creditable road to BA’s $10B FCF 2025/2026 target," as they reiterate a "Buy" rating on the shares, and raise their Price Target to $250.

Shares of BA closed at $206.76 in prior session, and are up nearly 6% YTD.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.