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In a recent analysis that may leave stock traders reevaluating their positions, analysts from Wells Fargo have issued a sobering outlook on Boeing (NYSE: BA). They have downgraded the aerospace giant's ratings from "equal weight" to "underweight" and adjusted their price target downwards from $185 to $119. This shift reflects concerns that Boeing's free cash flow could reach its peak sooner rather than later, potentially stalling the anticipated growth many investors were counting on.
Wells Fargo's analysts highlighted a significant point: they believe Boeing had the potential for "generational" free cash flow throughout this decade, driven largely by ramped-up production of established aircraft with relatively low investment requirements. However, ongoing delays and escalating costs are reshaping that narrative. The analysts predict that Boeing's free cash flow per share may plateau around 2027, largely due to the significant investments required for new aircraft development that will eat into profits from increased output.
“We think Boeing was on the cusp of capitalizing on a monumental cash flow opportunity, but new challenges have emerged,” the team at Wells Fargo remarked. They suggest that the need for an equity raise—to address both balance sheet concerns and fund new jet production—might further dilute existing shares, exacerbating the situation for investors
Boeing has publicly committed to ramping up production by the end of 2024, even after facing complications from its supply chain and assembly line, which have been under pressure following the mid-air incident involving a 737 Max 9 jet earlier this year. In July, the company managed to deliver 43 commercial aircraft, mirroring its performance from the previous year.
However, the hurdles do not stop there. The Wells Fargo analysts cautiously noted that Boeing's road ahead is littered with various obstacles. These include imminent union negotiations, the intricate integration of airline parts supplier Spirit AeroSystems (NYSE: SPR), and potential declines in airline revenues that could hamper future orders.
