Big banks bearish on Boeing

Boeing shares took a hit Tuesday after Wells Fargo & Co. downgraded the company and warned investors to get out. Boeing closed Tuesday at $161.02. down 12.72 or 7.32%.

The investment site Morningstar said that “whatever decision the troubled aerospace giant makes on what to do with its cash and debt will likely be bad for the stock.”  The stock dropped as much as 8.9%, hitting its lowest intraday level since November 2022.

“For more than a decade, Boeing bought back shares of stock, which has been a major criticism among many, including myself,” aviation expert Scott Hamilton told KIRO Newsradio. “But by buying back stock, you reduce the number of shares that are out there, and therefore you increase the earnings per share.”

Bank of America analyst Matthew Akers slashed the price target to $119, the lowest among analysts tracked by Bloomberg. Akers also slashed his price target for Boeing to $119 from $185, making him the most bearish among the 30 analysts surveyed by FactSet. This new target implies a potential 25% decline from current levels.

A new setback hits a Boeing jet: US will require inspection of pilot seats on 787s

He also warned that Boeing’s credit rating could be downgraded to “junk” status if its balance sheet doesn’t improve.

“A substantial further equity raise is needed in the coming years, further diluting shareholders,” Akers wrote.

Hamilton mirrored Akers comments. “In this case, because Boeing stock performance really pretty well sucks because of its current business model and weak balance sheet and losses,” he said.

Several factors are contributing to Boeing’s stock decline:

1. Financial Challenges: Boeing is grappling with significant debt, estimated at around $45 billion, a figure Akers believes must be addressed before the company can embark on its next aircraft development cycle. This financial burden is impacting investor confidence, according to Morningstar.
2. Operational Issues: The company faces ongoing production and quality control issues, particularly with its 737 MAX and 787 aircraft. According to Motley Fool, These problems have led to delays and increased costs.
3. Market Competition: Boeing is in fierce competition with Airbus, which has been gaining market share. This rivalry puts additional pressure on Boeing to innovate and deliver on time, based on a study by Business Model Analyst.
4. Economic Factors: Broader economic concerns, such as a potential slowdown in the U.S. economy, are also affecting Boeing’s stock. Softer-than-expected jobs data has raised fears of a significant economic downturn.
5. Regulatory and Safety Concerns: Past safety issues, including the 737 MAX crashes, continue to haunt Boeing. Investopedia reported regulatory scrutiny, and the need to ensure compliance with safety standards add to the company’s challenges.
6. Labor and Supply Chain Issues: Boeing is facing labor disputes and supply chain disruptions, which are further complicating its production schedules and increasing costs.

Legal issues: Justice Department defends Boeing plea deal against criticism by 737 Max crash victims’ families

“In a nutshell, this is just another step in in the financial morass that Boeing has found itself in, after constantly being in trouble since 2019,” Hamilton said. “I think it’s a necessary step to issue new stock, if indeed that’s what they do, to pay off billions of dollars in debt and finance a new airplane and maybe give some sort of compensation to the unions in the former stock.”

Contributing: Heather Bosch, KIRO Newsradio

Bill Kaczaraba is a content editor at MyNorthwest. You can read his stories here. Follow Bill on X, formerly known as Twitter, here and email him here.