One Wall Street analyst is recommending Boeing shares again because the 737 MAX jet is near to returning to service.
Edward Jones analyst Jeff Windau raised his Boeing (ticker: BA) rating to Buy on Thursday afternoon from Hold. He doesn’t have a price target for the shares.
A Buy rating, in this instance, means “the valuation is attractive and total return potential is above average over the next [three to five] years compared with industry peers,” according to his report. Edward Jones takes a long-term view in their stock recommendations, while most Wall Street price targets reflect analysts’ outlooks for the next six to 12 months.
Covid-19 remains an obvious headwind for the stock, but shares have already fallen 48% year to date as the pandemic has devastated demand for air travel—and the jets Boeing makes.
“We look favorably on Boeing’s progress with the 737 MAX as test flights have recently been completed with regulators,” said the analyst. The Federal Aviation Administration recently completed a series of test flights, and regulators overseas are flying the plane as well, seeking to evaluate whether Boeing has fixed problems that led to two deadly crashes within five months.
The MAX has been grounded worldwide since shortly after the second crash, in mid-March 2019. Boeing has spent months fixing the plane and believes it can return it to commercial service by the end of 2020.
Windau is taking the long view regarding the pandemic. “While volatility could remain in the airline industry in the near term due to the coronavirus, we believe plane deliveries will grow in the coming years, allowing for improved cash generation,” he wrote.
His upgrade hit some market-news sites before the market closed on Thursday, before the market closed. Boeing shares closed down 3.4% nevertheless, amid the broad market selloff that sent the S&P 500 3.5% lower. The Dow Jones Industrial Average dropped 808 points, or 2.8%, while the Nasdaq Composite was hit hardest, falling 5%.
And despite the bullish call, the rest of Wall Street hasn’t warmed up to Boeing shares yet. About 40% of analysts covering the company rate shares the equivalent of Buy. The average Buy-rating ratio for stocks in the Dow Jones Industrial Average is about 58%.
It has been quite a reversal of fortune for the stock. Before the second MAX accident, 80% of analysts covering the company rated shares Buy and the average analyst price target was about $450 a share, compared with roughly $180 now.
Windau, for his part, downgraded shares after the second MAX crash. It was a good call. Boeing stock was about $400 a share when he cut his rating from Buy to Hold.
Boeing stock was up 1.3% to $170.90 in early Friday trading.
Write to Al Root at allen.root@dowjones.com
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