The Ratings Game: Boeing’s stock falls after UBS analyst Myles Walton cuts price target, but says expectations have ‘bottomed out’


Shares of Boeing Co. dropped Tuesday, after UBS analyst Myles Walton cut his price target and revenue estimates, saying he sees “no reason” to expect any 787 deliveries for the rest of the third quarter.

But Walton maintained the buy rating he’s had on the aerospace and defense giant’s stock since December 2020, as he believes investor expectations have “bottomed out.”

The stock

slumped 1.7% in afternoon trading. It has extended its lead as the Dow Jones Industrial Average’s

worst performer over the past three months, as it has tumbled 15.1% while the Dow has gained 1.6%. The next biggest Dow decliner over the past three months is Caterpillar Inc.’s stock
which has shed 12.6%.

Walton cut his price target to $290, which is about 35% above current levels, from $310. He also cut his 2021 sales estimate by 10% to $67.53 billion, which compares with the FactSet consensus of $75.17 billion. He now expects “just a dozen” 787 jet deliveries by the end of the year.

FactSet, MarketWatch

The price target and estimate cuts come after The Wall Street Journal reported over the weekend, citing people familiar wit h the matter, that deliveries of the 787 Dreamliner were likely to remain halted until at least late October amid continued regulator concerns over safety. Read more about 787 delivery delays.

“From our conversations with investors, we sense very little in the way of expectations built into [Boeing’s] shares on a big performance turnaround before the end of the year,” Walton wrote in a note to clients. “We also sense the name is among the least owned of the large-cap cyclicals given the obvious overhangs.”

With that in mind, he said that it’s hard to quantify at what point investor expectations have hit bottom, “but this sure feels like it” for Boeing’s stock.

Walton said the potential biggest upside catalysts for Boeing’s stock are if Boeing’s 737 MAX planes are recertified in China and the eventual restart of 787 deliveries.

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