Boeing stock (NYSE:BA) dropped 9% after the company reported a massive earnings shortfall on Wednesday. The good news is that, according to Wall Street experts, Boeing is recouping some of its losses today.
So, What’s the Deal?
Investment bankers Susquehanna, Wells Fargo, R.W. Baird, and Morgan Stanley all decreased their price estimates on Boeing shares today, pricing the aerospace giant’s stock at between $180 and $213 per share.
That may seem to be awful news, but here’s the thing: BA ended yesterday at less than $134 a share, implying that even the most conservative price target (from Susquehanna, by the way) predicts more than 34% upside in Boeing shares. It’s hardly surprising, therefore, that all four of these analysts maintained buy recommendations on Boeing while lowering their price estimates on the company.
Boeing Stock: What Now?
Despite a damaged military industry and supply chain issues plaguing its 737 MAX program, all four analysts remain positive on BA, and one reason for this – and one reason why they may be correct – is Boeing’s free cash flow.
As my fellow Fool Lou Whiteman pointed out yesterday, Boeing actually outperformed analyst estimates for free cash flow, earning $3.2 billion in real cash profits while reporting a $6.18 per-share net loss under generally accepted accounting standards (GAAP). Wells Fargo calculated that when Boeing’s business improves, the firm could possibly create anywhere from $8 billion to $11 billion in free cash flow annually, implying that Boeing might be selling for as little as 7.6 times its projected FCF figure right now.
How long will it take to get there? Boeing might surpass the $11 billion mark as early as 2024, according to S&P Global Market Intelligence forecasts. If you can wait two years to profit, Boeing shares may be a good investment right now.
Featured Image- Unsplash @ Jacob Mathers
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