Boeing (BA) has struggled in recent years, as it has dealt with the repercussions of the 737 MAX crashes. The aircraft’s recertification came at the end of last year, after Covid-19 had decimated the aviation industry and brought the company dangerously close to bankruptcy.
However, with the economy reopening, Jefferies analyst Sheila Kahyaoglu thinks the time is right for a more upbeat take on the aerospace giant's prospects. With early stages of recovery and air travel high on the agenda, the analyst believes pent-up demand “could drive an accelerated delivery recovery.”
As a base case scenario, Kahyaoglu expects BA to deliver 388 aircrafts in 2021, “primarily driven by the MAX.” The analyst expects BA’s MAX deliveries will accelerate to around 240 this year (14 a month from production with 69 out of inventory). This equates to 20 a month vs. the 27 delivered last December, which incidentally accounted for the total delivered in 2020.
By 2023, Kahyaoglu expects BA to deliver 480 MAXes – with 31 a month from production and 108 out of inventory.
This uptrend will continue over the next few years and Kahyaoglu thinks total deliveries will increase to 732 in 2025, with the MAX contributing 564 of the total. That said, the 732 deliveries are still 9% below the 2018 peak.
In a bull case scenario, based on “an accelerated recovery of commercial deliveries and productivity,” things look slightly different.
In this case, Kahyaoglu thinks deliveries could already reach 752 by 2023 compared to 608 in the base case.
The analyst believes upside to production could come from an “acceleration of deliveries out of inventory,” and says the recent total of 223 MAX orders from Ryanair, LUV, UAL, and ALK “have pointed to some improvement.”
Should this recovery continue, Kahyaoglu sees potential for 600 deliveries for the MAX in 2023, equating to ~50 a month – much higher than the 480 expected for 2023 in the base case.
Ok, so good news for Boeing, but what does it all mean for investors? Kahyaoglu reiterated a Buy rating on BA shares, backed by a $300 price target. The 12-month upside potential here comes in at 23%. (To view Kahyaoglu’s track record, click here)
The Jefferies analyst’s view is more upbeat than the rest of the Street’s take; over the next year, shares are anticipated to add a modest 5%, given the average price target currently stands at $257.13. Overall, the stock has a Moderate Buy consensus rating, based on 8 Buys vs. 6 Holds and 2 Sells. (See Boeing stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.