Bank of America analysts cut the price target on Boeing (NYSE:BA) by $20 per share to $255. BofA remains Buy-rated on BA stock as analysts remain “cautiously optimistic” on the stock.
“Boeing is one of two players in a global duopoly for commercial aircraft which are in short supply. Despite the recent issues, we believe BA has been making steady, if not slow, progress in addressing some of the internal shortfalls that led to its current situation,” the analysts said.
“Investors should not expect things to change quickly, but more progress can and will be made.”
Analysts note that Boeing is facing heightened FAA scrutiny and increased inspections, potentially slowing production growth. The implementation of recommendations from an external party regarding Boeing's quality program raises concerns, particularly considering the company's legacy.
“We are honestly astonished, given the company’s legacy and heritage, that an outside party is required to make recommendations. The recovery path to historical 25% cash margins on the 737 program would not only be impacted by lower production levels, but also be hit by the incremental costs of adding increased quality control.”
The analysts also added that their estimates on BA’s production remain unchanged, although they see risk to consensus.
“Consensus remains significantly more bullish than both our production and FCF estimates.”
The MAX 9 issues are anticipated to intensify pressure on Boeing's management, reflecting perceived shortcomings in execution improvement following the initial MAX grounding and COVID-related slowdowns.
Beyond the results of NTSB and FAA investigations, regulatory bodies are expected to seek more substantial internal changes within Boeing, according to analysts.
“We would not be surprised to see regulators, investors and customers push for a turnover in the ranks of senior management and the Board of Directors.”