American aerospace giant Boeing has seen its stock price plummet almost by half in the last five years. The fall was precipitated by the Ethiopian Airlines Flight 302 disaster, a Boeing 737 MAX aircraft which in 2019 nosedived into the ground, resulting in the deaths of all 157 people aboard. The National Transportation Safety Board reportedly concluded the crash occurred as a result of “the design of Boeing’s new flight control software that repeatedly pushed the jet’s nose.”

In the intervening years, Boeing planes have suffered a series of concerning safety incidents, with the firm’s CEO publicly admitting mistakes. After 170 of its aircraft were grounded following a January incident in which a 737 MAX door plug snapped off mid-air, CEO Dave Calhoun said he was “shaken to the bone.” Mr Calhoun has since said he would step down from the role before the end of the year. 

In May, Boeing was made the subject of a fresh inquiry, with allegations that the company had not adequately inspected its 787 Dreamliner aircraft, after the US Congress heard testimony from whistleblowers in which Boeing was accused of ‘dismissing concerns’ over the aircraft. Boeing has admitted while it has taken steps toward strengthening its quality management, it ‘isn’t where it needs to be.’ 

However, while Boeing’s stock has suffered as a result of safety failures, it remains one of the largest manufacturers in the US, with a 2023 turnover of $77 billion. With more than 170,000 employees, over 10,000 commercial jetliners in service, and a household brand name, could Boeing be too big to fail? 

Boeing’s journey has been marked by high-profile safety incidents, leading to a 50% drop in its stock, while competitor Airbus saw a 30% rise. However, many analysts maintain an optimistic outlook for Boeing, foreseeing a bright future despite the challenges. 

What is the outlook for Boeing? 

In 2022, Boeing set out ambitious targets for growth, centred around a strategy to grow its fleet and expand its defence arm, with a view to achieving $10 billion in free cash flow by 2025/2026. However, analysis by The Motley Fool finds Boeing is falling short of its target after failing to meet its 2023 target for aircraft production while being hit by additional safety setbacks. However, writing for the outlet, Lee Samaha says there is reason to remain optimistic about Boeing’s longer-term prospects. He said:

“The company will likely be in a better place in a few years than it is now. Still, the nuance of the timing of its FCF generation has a significant impact on the investment proposition and its longer-term future. The stock is attractive, but there are plenty of other aerospace stocks to buy that are executing better operationally. Right now, Boeing needs a few quarters of solid execution to dispel the doubters.”

This medium-term shortfall prompted Fitch to downgrade Boeing from  ‘stable’ to ‘negative’ in April. Explaining the decision, a spokesperson for Fitch said: 

“The Negative Outlook reflects Boeing’s heightened execution risks over the next 12 to 24 months as it eliminates legacy inventory, stabilises and increases aircraft production rates, navigates seasonal cash flow volatility, pursues additional corporate actions that should enhance longer-term operations, and fulfils its commitment to repay debt and return to IG metrics.”

However, many analysts remain unshaken from their stance that Boeing’s long-term prospects are brimming with potential. Many observers continue to be confident the company will overcome safety issues and see success in expanding its defence arm. As Simple Flying reports: 

“There are a number of different factors that might be affecting analysts’ positive outlooks on Boeing, which include several medium and long-term growth initiatives that will likely outweigh the damage caused by the most recent news cycle.”

Some believe Boeing is just too big to fail, including the CEO of Aviation Advocacy Andrew Charlton, who, when the question was put to him, said:

“The American economy probably thinks so; the airline industry most certainly thinks so.”

Is Boeing stock a buy?

Perhaps reflecting this long-term optimism, Boeing has a consensus rating of ‘buy’, as per Markets Insider, with 54 buy ratings against 21 hold ratings and just four sell ratings, with a Deutsche Bank analyst forecasting a 27% upside within the next twelve months. 

Scott Deuschle is among the more optimistic observers of Boeing, and in May, recommended investors buy the shares, issuing a price target of $225 per share. The comments came after the release of sluggish sales data, which showed six new commercial aircraft deliveries of which two had been retrieved from storage. 

Zacks Research predicts a below-average return on Boeing shares in the coming months and said it would not be a good stock for momentum investors in light of recent price changes and earnings estimate revisions. 

Writing for the MorningStar in April, Nicolas Owens said while he anticipated a mid-2025 date for Boeing to iron out its manufacturing processes, it would improve its margins and scale up deliveries in the long term. On this basis, he said he believed the stock was currently undervalued, and that investors should be forward-looking and consider the situation in 2026/27. He said: 

“[W]e believe Boeing’s stock is undervalued compared with our long-term fair value estimate of $221 per share, representing an equity value 33 times our 2025 adjusted EBITDA estimate and two times our 2025 sales estimate. 
“We think the enormous special charges and fleet groundings are mostly behind Boeing, and we forecast one or two more years of hard slogging as it clears up manufacturing and supply chain issues. Our valuation includes healthy long-term global demand for Boeing’s products, successful scaling-up of deliveries, and margins on its bread-and-butter 737 and 787 models in the 2026-27 timeframe.”

In April, Forbes published an analysis arguing for a Boeing valuation of $259 per share, which it was argued would be realised after the company surmounted “near-term headwinds.” The valuation was made in part because of an existing $500 billion order backlog and an expectation that demand for air travel will increase. Forbes’ Trefis Team, which it says is led by MIT engineers and Wall Street analysts, said investors could set themselves up for returns by ‘buying the dip.’ They said:

“There is a massive demand for new aeroplanes amid rising travel, and the overall market is likely to remain undersupplied. Moreover, given the sharp decline, much of the negatives appear to be priced in now. We believe investors can use the current dip in BA to enter for solid long-term gains.”

Boeing’s Near-Term Challenges

Boeing continues to grapple with safety and quality issues, notably the problems surrounding the 737 MAX and the 787 Dreamliner inspections. These issues have eroded investor confidence and contributed to financial downgrades. Fitch recently downgraded Boeing’s rating from stable to negative, citing heightened execution risks and the need to stabilise production rates and manage seasonal cash flow volatility​​. Additionally, Boeing missed its 2023 production targets, further compounding these challenges​​.

However, Boeing has shown some positive financial movements. For instance, Boeing Global Services reported a 9% increase in revenue and a significant improvement in operating margins in 2023, reflecting more robust commercial volume and mix​​. These positive segments within Boeing’s broader operations hint at the potential for recovery and stabilisation.

Boeing’s Long-Term Prospects

Despite near-term hurdles, analysts maintain a positive long-term outlook for Boeing. The company has forecasted a $9 trillion market opportunity in aerospace over the next decade, spanning the commercial, defence, and services sectors​​. This optimistic projection is supported by Boeing’s extensive order backlog valued at $500 billion, signalling sustained demand for its products​​.

Furthermore, Boeing’s strategic initiatives, such as expanding its defence arm and focusing on growing its fleet, are expected to bolster its market position. The resurgence in air travel demand post-pandemic and the increasing need for new and converted freighters due to the boom in e-commerce also play to Boeing’s strengths​​.

Too Big to Fail?

Boeing’s significance to the U.S. economy and its integral role in the global aerospace industry means it might just be too big to fail. The company’s substantial workforce, critical defence contracts, and extensive global fleet underscore its entrenched position. Government intervention, if necessary, would likely aim to stabilise such a pivotal player in the industry.

While Boeing faces substantial short-term challenges, analysts say it has potential in the long run, and most suggest it will likely bounce back from its present challenges.