A Jefferies analyst just lately maintained a purchase score and a $200 worth goal on Boeing (BA 2.98%) inventory, arguing that fears over the impression of potential tariffs on China are exaggerated, provided that the nation is chargeable for solely 2% of Boeing’s backlog.
What the $200 goal implies
Whereas the argument has benefit, the value goal appears to be like bold. The $200 determine, providing 37% upside from latest costs, would put Boeing at a market cap of virtually $150 billion. The Wall Avenue analyst consensus is that the corporate will generate $5.3 billion in free money circulate (FCF) in 2026 and carry $37 billion in web debt in the identical 12 months.
A $200 worth goal implies a price-to-FCF a number of of 28 in 2026.
Is Boeing inventory price $200?
If it hits analyst expectations, you possibly can make a case for Boeing being an excellent worth. A valuation of 28 occasions FCF in 2026 appears to be like costly. A snapshot that 12 months may present an organization ramping up airplane manufacturing and, in flip, revenue margins, with the protection enterprise rising earnings because it labored by way of problematic legacy fixed-price improvement contracts.
In the meantime, provided that its present backlog is about $500 billion, in response to CEO Kelly Ortberg on a latest earnings name, it is solely as much as Boeing to execute and ship on these orders.
Picture supply: Boeing.
However not solely is there substantive threat round Boeing assembly its numbers, there’s additionally one thing else to chop and paste into that 2026 snapshot: the necessity to develop a brand new airplane for the following cycle of narrow-body plane.
The earlier CEO stated the corporate wouldn’t have a brand new airplane prepared earlier than 2035, and it takes years of funding to arrange for that. As such, buyers might want to issue within the money circulate necessities for that after they attempt to think about that snapshot of 2026.
It is an particularly related level contemplating that Asia is the fastest-growing aviation market, and China’s Comac plane might be extra aggressive within the subsequent cycle of narrow-body planes.
Lee Samaha has no place in any of the shares talked about. The Motley Idiot has no place in any of the shares talked about. The Motley Idiot has a disclosure coverage.
