What Happened:
Shares of aerospace and defense company Boeing (NYSE:BA) fell 8.3% in the morning session after Wells Fargo analyst Matthew Akers downgraded the stock's rating from Equal Weight (Hold) to Underweight (Sell) and lowered the price target from $185 to $119. The new price target implied a potential 25% downside from where shares traded when the downgrade was announced. The analyst called out cash flow concerns relating to BA's efforts to build new aircraft.
The analyst added, "Boeing (BA) had a generational free cash flow opportunity this decade, driven by ramping production on mature aircraft and low investment need...But after extensive delays and added cost, we now see growing production cash flow running into a new aircraft investment cycle, capping FCF a few years out."
Looking ahead, the analyst is forecasting that Boeing might have to issue more stock (potentially dilutive to existing shareholders) to shore up its balance sheet and fund future aircraft investments.
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What is the market telling us:
Boeing’s shares are somewhat volatile and over the last year have had 6 moves greater than 5%. In context of that, today’s move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
Boeing is down 36% since the beginning of the year, and at $160.98 per share it is trading 39.1% below its 52-week high of $264.27 from December 2023. Investors who bought $1,000 worth of Boeing’s shares 5 years ago would now be looking at an investment worth $454.21.
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