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Boeing share price forecast for 2020 and beyond: will the stock fly high?

16:11, 25 August 2020

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Boeing share price forecast

Boeing stock performance has been under pressure in the past year as the company moved from one crisis to another. The shares have shed by nearly 48 per cent in the past 12 months and by 47 per cent year-to-date. For comparison, the S&P 500 (US500) has gained 17 per cent and 5.1 per cent, respectively, while Airbus (AIR), the company’s closest competitor, has lost 40 per cent and 43 per cent off its shares.

Boeing share price forecast

So, is Boeing stock a buy or sell in the second half of 2020?

Crashing lower yet again: why is Boeing stock dropping?

Why did the Boeing stock price drop? This year, the company has faced two major challenges. It started 2020 with its 2019 problems relating to its best-selling Boeing 737-Max plane. The firm was forced to halt production of the aircraft, which had more than 4,000 orders after two plane crashes.

During the year, the company worked hard to fix the Manoeuvring Characteristics Augmentation System (MCAS) that was blamed for the catastrophes. At the same time, the Congress and the Department of Justice started investigating the business. As all this happened, the company lost more than 800 Max orders.

However, the worst was yet to come. In their bid to slow the spread of the Covid-19 pandemic,  countries around the globe started to suspend international flights. Subsequently, several airlines like Flybe, Avianca, and Virgin Australia went bankrupt. Many others, including Lufthansa (LHA), American Airlines (AAL), Delta (DAL), and Cathay Pacific (0293) received government bailouts to survive the crisis.

With the coronavirus spreading and international travel being under pressure, most of Boeing’s biggest customers have been struggling to pay for their orders.

The impact of all these problems is reflected in Boeing’s financial performance. In the first quarter, the company’s revenue declined to $16.9bn from $22.9bn in the same quarter in 2019. The business posted a net loss of more than $1.3bn from a profit of $2.3bn a year before.

Boeing’s problems continued in the second quarter as its revenue dropped even lower, from $15bn to $11.8bn. Its losses increased to more than $2.3bn.

Meanwhile, the company has suspended its then-lucrative dividend in its bid to save cash and announced plans to slash about 10 per cent of its workforce. It also raised $25bn, pushing its total debt to more than $60bn. At the end of Q2, Boeing had more than $32bn in cash and short-term investments.

Right before we dive into the Boeing stock outlook, let’s quickly recap how the company's shares have performed over the past few years.

The stock that was once stellar: BA stock analysis

Before the 737-Max crisis, Boeing was one of the most popular members of the Dow Jones Industrial Average (DJIA). Investors rooted for the company because of its strong moat in the civilian and defence industries, its healthy historical cash flows, and its solid dividend. In fact, before the Covid-19 pandemic, the business was a famous dividend aristocrat that had paid a dividend since 1937.

All this was influencing the company’s stock price chart. For example, between January 2010 and December 2019, BA stock rose by more than 500 per cent. In contrast, the Dow Jones and the S&P 500 soared by 189 per cent and 173 per cent, respectively.

However, since its problems started in March 2019, the shares have dropped by 60 per cent while the two indices have gained 7 per cent and 21 per cent, respectively. From March this year, the stock has declined by more than 40 per cent.

On a positive side, the Boeing share price has recovered quite well in recent months. At the peak of the coronavirus panic in March, the stock dropped to a multi-year low of $95. Since then, it has jumped by more than 77 per cent to the current $169.

There are three main reasons why Boeing stock has rallied recently. First, the overall stock market has been in an uptrend, mostly because of the low-interest rates implemented by the Federal Reserve. Second, the likelihood of a coronavirus vaccine has boosted sentiment that the travel industry would recover soon. Third, the firm’s defence segment has received a substantial amount of orders. In July, the company revealed that it had received $23.4bn in defence and service contracts.

Boeing share price forecast for the rest of 2020 and beyond

Looking ahead, Boeing stock performance will depend on two key factors: 737-MAX recertification and development of the coronavirus vaccine. In July, the Federal Aviation Administration (FAA) conducted its first 737-MAX recertification flights. After the FAA completes the process, it will then join a multi-country review with the goal of examining the proposed fixes. Second, once an effective coronavirus vaccine is brought to the public, it will provide people with the confidence to fly again.

Analysts have mixed Boeing stock predictions. There are market experts who believe that the company’s shares are overvalued and that they are due for a correction. For example, in their BA stock forecast, analysts at Cowen expect the stock to fall back to $150. Similarly, those at Canaccord Genuity, Credit Suisse, and Wolfe Research expect it to decline to $155, $156, and $149, respectively.

On the other hand, analysts at Jefferies, Susquehanna, and Goldman Sachs predict that the shares will climb to trade above $200.

Boeing stock analysts forecast

Meanwhile, the technical Boeing share price prediction provided by Wallet Investor shows that the maximum price the stock could potentially hit this year is $208. Over the coming months, the price is expected to trade in the downtrend, eventually falling to end 2021 at $134.23.

Boeing stock price forecast

Final thoughts

Boeing is an iconic American company that is currently under siege. Its current stock price is close to where it was in 2017. The firm has withdrawn its dividend and forward guidance and is in the process of laying-off more than 10 per cent of its employees. Worse, airlines, who are its biggest customers, are going through their toughest period, with many facing existential threats.

 

Read more: Tesla share price forecast: will Tesla stock go up past $2,000?

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