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Boeing Faces Diverging Analyst Opinions and Cash Flow Concerns

Boeing's stock is currently torn between opposing analyst views, with one predicting substantial cash flow challenges by 2025. Investors are left weighing long-term potential against pressing operational issues that could impact stock performance.

Date: 
AI Rating:   4
Boeing's Cash Flow Challenges
Boeing is under scrutiny primarily due to its projected Free Cash Flow (FCF) outlook. A Wells Fargo analyst maintains an underweight rating with a target of $113, indicating significant concerns. The projected FCF for 2025 is an outflow of $4.9 billion, which starkly contrasts the ambitious forecast of $10 billion. The consensus is for a slow recovery, anticipating only $5.7 billion in 2026.
Furthermore, Boeing's stock has become diluted due to the issuance of additional shares to manage rising debt levels. From 600 million shares to approximately 739.3 million, this dilution reduces the potential benefits of free cash flow. If Boeing achieves the anticipated FCF, it translates to $7.7 billion at the new share count, a substantial drop from initial expectations of $16.66 per share when shares were fewer in number.
Operational inefficiencies also contribute to skepticism regarding Boeing's recovery. Supply chain issues and workforce strikes have hampered the production rate of the 737 MAX, which was set to reach 50 planes monthly, now adjusted to only 38.
Defense Business Outlook
The defense sector also suffers, with previous expectations of $2 billion in cash flow for the defense, space, and security (BDS) segment now revised to potential breakeven by 2026 or 2027. Ongoing issues in fixed-price development programs have prompted noticeable multibillion-dollar losses, further compounding investor concerns.
Long-Term Potential and Market Position
Conversely, a Citi analyst suggests that the current bad news could be fully priced into Boeing's stock, indicating potential upside if Boeing can generate even low single-digit FCF. The commercial aerospace market appears to be stable, with Boeing holding a substantial backlog alongside competitors like Airbus, inferring a favorable position in market growth expected at 3.2% annually between 2024 and 2043.
Investors might find it prudent to adopt a wait-and-see stance, monitoring the company's capacity to deliver on its key objectives and alleviate cash flow concerns before making any definitive investment decisions.
Stocks:  BA