Why Boeing Stocks Are Falling Today

Boeing (BA -8.71%) shareholders have endured wave after wave of bad news in recent years. At least one analyst sees no quick rebound.

Boeing shares were trading up 7% as of 10:30 a.m. ET after the stock was downgraded and the price target was cut to well below the current price.

No easy way forward

Boeing’s woes are well known. A pair of deadly crashes grounded the company’s 737 MAX for 18 months and triggered a deep look at the company’s manufacturing practices, leading to significant delays in other jet programs as well. The company has fallen behind its domestic production targets, causing problems for customers and leading airlines to look elsewhere.

Unfortunately, these troubles have come during a period of strong growth for this notoriously cyclical industry. Boeing’s competitors generate significant profits and cash flows.

Wells Fargo analyst Matthew Akers fears that missing out on this uptick in demand will cost investors in the long run. Akers downgraded Boeing to underweight from equal weight and cut his price target to $119 from $185.

Akers expects Boeing’s free cash flow to peak by 2027 as future aircraft development costs offset production growth, and he believes equity growth is likely. Boeing’s debt rose to $45 billion because of the crisis. Paying it off would eat up all the money expected by 2030, according to Akers.

Is Boeing a buy?

Boeing shares are down more than 60% from where they were before the first MAX incident. It’s tempting to see the problems as temporary and conclude that the stock is a buy for long-term holders. Akers’ demotion highlights the danger in this thinking.

Boeing is one half of a powerful global duopoly and will have ample opportunity to restore sales and rebuild its business. But the company is saddled with billions in debt, and the demand for planes is not unlimited.

Given Boeing’s erratic recent history, investors should stay away until the company proves it has fixed its production woes. But even if it does, be warned that Boeing faces a long road to recovery from there.