Boeing 737 MAX airplanes.
Photograph by David Ryder/Getty ImagesCredit Suisse raised its price target on Boeing stock Wednesday to $367 from $321. The new target is about 7% higher than recent trading levels. Analyst Robert Spingarn, however, stopped short of recommending shares.
He still rates Boeing stock (ticker: BA) at the equivalent of Hold, and the target increase reflects his belief that good news is on the horizon for the commercial aerospace giant and its troubled 737 MAX jet.
The MAX—Boeing’s newest model single-aisle jet—has been grounded world-wide since mid-March following two deadly crashes inside of five months. Boeing believes it can return the plane to service in mid-2020 after global aviation authorities sign off on modifications intended to make the plane safer.
Spingarn got a chance to speak with management in New York City Tuesday. Boeing officials sat down with Wall Street analysts to discuss cash flow, customer compensation for MAX delays, as well as other topics.
“While nothing material was revealed, the perspectives offered by the company...left us incrementally more constructive on the name,” the analyst wrote in a Wednesday research report. In particular, he believes the company is “entering into a positive news period” culminating in the MAX returning to service.
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Having the MAX re-enter commercial service qualifies as good news for the embattled company. The risk from this point, according to Spingarn, is if Boeing can’t hit the mid-2020 timeline. That could mean more cash out the door to sate waiting airline customers. Still, he notes Boeing has ample cash on hand, and keeping the dividend safe is a priority for management.
Return to service won’t be the end of the MAX story. Investors hoped early on that flying again would end of the MAX drama, but a return to service likely represents only the close of the first act. After the plane is back in the air, Boeing will have to update and deliver 400-plus parked jets, ramp up production again and win back pilot and public trust damaged by the lengthy delays.
Baird analyst Peter Arment attended the same event Tuesday. He, like Spingarn, wrote about cash, noting customer compensation and program costs are “front-loaded” leaving 2021 and beyond cleaner years–that is, accounting free of pro forma figures and footnotes. “We believe 2022 will be the first true clean year and it will take until 2023 to get back to 52 [MAX jets] per month.”
The MAX will be an overhang for the stock for months, if not years, to come.
Arment, like Spingarn, rates Boeing stock at the equivalent of hold. His price target for the stock is $322.
Before the second deadly MAX crash in March 2019 involving an Ethiopian Airlines flight, Boeing stock traded at about $422. The stock is down 18% since then, trailing far behind comparable gains of the S&P 500 and Dow Jones Industrial Average over the same span.
Boeing stock is up 0.8% to $347.12 in Wednesday morning trading.
Write to Al Root at allen.root@dowjones.com
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