Boeing’s stock is currently at the center of a storm of differing opinions among investors and analysts on Wall Street. This divide became even more apparent when a Wells Fargo analyst decided to maintain an underweight rating, giving the stock a $113 price target. Meanwhile, a Citi analyst stood by their buy recommendation with a $210 target. Such stark contrasts in opinion warrant a closer look to help investors make informed decisions.
### The Bearish Perspective on Boeing
From the viewpoint of Wells Fargo, Boeing has veered off course from the optimistic forecasts it laid out for 2025. Back during their investor day, Boeing had set an ambitious goal of achieving $10 billion in free cash flow (FCF) by the 2025/2026 timeframe. However, it’s becoming increasingly clear that’s not happening. Analysts now foresee an outflow of $4.9 billion in 2025, with only $5.7 billion in FCF expected the following year.
The situation is exacerbated when you factor in the impact of share dilution. Boeing ended 2022 with approximately 600 million shares outstanding, meaning that $10 billion in FCF equated to $16.66 per share. But, owing to their mounting debts, the company had to issue an additional 112.5 million shares, thereby diluting the claims of existing shareholders.
In simple terms, even if Boeing hits the anticipated $5.7 billion FCF in 2026, with around 739.3 million shares circulating, the FCF per share would plummet to roughly $7.7, far below the original estimation.
Moreover, it’s not just the figures that are troubling; the underlying reasons are equally concerning. Production hurdles, quality issues, and labor strikes have hindered Boeing’s goal to produce 38 units monthly of the 737 MAX in 2025, falling short of the more ambitious target of 50 units. Such setbacks have shaken the confidence of both investors and airlines.
In terms of defense, space, and security, Boeing’s BDS division was once expected to generate $2 billion in operating cash flow over the 2025/2026 window. However, the latest updates from CFO Brian West indicate that breaking even by 2026 or 2027 is now the best-case scenario. Continuous delays, unexpected charges, and challenges with fixed-price development programs have been costly missteps.
Wells Fargo’s bottom line? They predict Boeing will miss the consensus expectation of $9 billion in FCF come 2027 by at least a billion dollars, which is reason enough for them to advise selling the stock.
### The Bullish Argument for Boeing
Conversely, the Citi analyst takes a more optimistic approach, emphasizing Boeing’s potential over the long haul. They argue that much of the negative sentiment is already reflected in the stock’s current price, which suggests that even modest FCF growth rates could have a substantial positive impact on its valuation. Notably, Boeing projects a 3.2% annual growth rate for the global airplane fleet between 2024 and 2043.
This outlook is supported by a robust demand for commercial aircraft, with major orders continuously coming from airlines looking to expand their fleets. Given the longstanding duopoly between Boeing and Airbus, these companies are in prime positions to maintain their dominance.
Consider this scenario: If Boeing manages to generate $7 billion in FCF by 2027, falling $2 billion short of current predictions, it would still result in the stock trading at 18 times its FCF, which isn’t bad. Boeing’s future growth would be further bolstered as production of models like the 737 MAX and the 777X matures and scales up.
### Is Boeing a Buy?
In the investment world, sometimes the wisest move is to sit back and wait. It seems that might be the best course with Boeing. Critics stemming from a bear perspective may be overly focused on past performance. It’s important to note that Boeing is under fresh leadership with the new CEO, Kelly Ortberg, trying to steer the company toward recovery, and the stock has already taken a beating.
However, proponents of a bullish standpoint rely on long-term projections which, given recent operational struggles, are hard to take at face value without some skepticism.
Ultimately, the temperature of Boeing’s trajectory could be best gauged through a patient, watchful approach. Observing the company’s ability to hit milestones like increasing 737 MAX output and improving BDS performance will provide clearer indicators of genuine progress and potential for future growth.
