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Here’s why this Jefferies’ analyst is still bullish on Boeing

Here’s why this Jefferies’ analyst is still bullish on Boeing


Wajeeh Khan

Jul 20, 2021

  • Kahyaoglu reiterates her ‘buy’ rating on Boeing with a price target of $300.
  • The Jefferies’ analyst says she is pessimistic on United Airlines Holdings.
  • Boeing shares are over 20% down from the year-to-date high in March.

Boeing Co’s (NYSA: BA) troubles keep on piling up, with the latest blow coming from its 787 Dreamliner last week as the twin-aisle jet came up with a new defect, resulting in a slashed production rate and delayed deliveries.

On the one hand, there’s Jim Cramer, who lashed out on Boeing’s management, saying, “I’m sick of what’s happening”; but on the other, there’s Sheila Kahyaoglu of Jefferies who still drew a bullish case for Boeing on Tuesday.

Sheila Kahyaoglu’s remarks on CNBC’s “Squawk on the Street”

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Kahyaoglu reiterated her ‘buy’ rating on Boeing and declared a price target of $300 per share. On CNBC’s “Squawk on the Street”, she said:

There’s a lot of near-term turbulence in Boeing. But you have to look two, three years out to get to normalised levels of free cash flow. And that’s why we are maintaining our buy rating on the stock.

The COVID-19 crisis delivered a massive hit to the aeroplane manufacturer last year as it wiped the demand for air travel. The pandemic came on top of Boeing’s ongoing struggles related to its bestselling 737 Max that faced a temporary ban after two fatal crashes.

We are forecasting $8 billion of free cash flow, and that’s excluding any working capital benefits because you can’t assume that continues. Boeing historically trades at a 20% market discount. Based on that, at a 5.5% free cash flow yield, we arrived at about $270 for the stock. That’s our 2023 estimate, Kahyaoglu added.

Boeing’s free cash flow currently stands at about $7 billion.

Jefferies analyst is pessimistic on United Airlines

Kahyaoglu also highlighted during her interview with CNBC that she was a bit pessimistic on United Airlines as it’s focused on Asia, where air traffic is still struggling to recover. UAL reports its quarterly results on Wednesday.

Boeing shares are up about 3% on Tuesday, but the $126 billion company is still down more than 20% from its year-to-date high in early March.

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