Boeing stock price: is BA a value trap or an outright bargain?

Boeing (NYSE: BA) stock price has continued to underperform the market this year as it moved from one crisis to the other. It has plunged by over 28% this year while the S&P 500 and Nasdaq 100 indices have soared by double digits.

Boeing faces major challenges
Boeing’s share price has continued to crash hard this year after the company’s crisis continued. In the aftermath, the company has reported huge losses, and most importantly, lost market share in its long battle with Airbus.

The most recent financial results showed that Boeing’s revenue dropped by 8% in the first quarter to $16.56 billion. Airbus, on the other hand, made over 12.8 billion euros ($13.7 billion) and over 0.6 billion euros in EBIT.

Boeing had a net loss of over $355 million and operating cash outflow jumped to over $3.3 billion. This happened as the company grounded some planes and took actions to remedy its safety record.

Boeing has also faced numerous investigations in the past few months, including by the Department of Justice (DoJ) and politicians. It is also investing heavily in safety in a bid to regain its reputation by companies.

Despite the challenges, there is a likelihood that Boeing’s stock will bounce back in the next few years. First, most analysts expect it to resume growing after it addresses the ongoing issues. The average estimate is that its revenue will rise from $77 billion in 2023 to over $94 billion in 2025. They also expect it to generate a profit per share of about $5.35 next year.

Second, Boeing still has a huge backlog from companies like United Airlines, Ryanair, and Ethiopian Airlines. It ended the last quarter with a backlog of over $529 billion, including over 5,600 planes. While this backlog is lower than Airbus’s 8,626, the company has more room to grow its business when it rebuilds its reputation.

Third, Boeing’s stock seems quite undervalued. In a recent note, an analyst conducted a DCF valuation that established the stock’s value at $200, higher than the current $185. A separate DCF calculation by SimplyWallSt shows that the fair value is $281, 34% increase from the current level.

Further, while Boeing’s safety record has been in the spotlight, the reality is that the company has a good record of making quality planes. Most of its planes like 767, 777, 787, and 747 have flown for years with minimal issues.

Still, Boeing faces several risks ahead. For one, it is unclear whether its re-incorporation of Spirit Aerosystems will work out as expected. Spirit is a leading company that supplies Boeing with products like fuselages.

Also, it is unclear how the investigations into Boeing will end up. I suspect that the company will receive a big fine and be ordered to improve its safety record, which is a positive thing. 

Boeing stock price forecast

The daily chart shows that the Boeing’s stock price has crashed hard in the past few months. It tumbled from last year’s high of $267 to the current $185. The stock has moved between the 50-day and 100-day Exponential Moving Averages (EMA).

Most recently, the stock has formed what looks like a bearish flag chart pattern, which is a popular negative sign. Therefore, I suspect that the shares will continue being volatile in the next few weeks.

If this happens, the stock will likely retest the support at $176, its lowest swing in November last year. In the long-term, however, the stock will likely rebound as the company makes progress on its safety record.