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Morgan Stanley Sees More Upside in Boeing’s Share Price

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Morgan Stanley raised target price

So far, Boeing (BA) shares have made a remarkable run in 2019. The company has outperformed the returns from its peers and US market indexes. However, the aerospace and defense contractor doesn’t have limited upside potential.

On February 28, Rajeev Lalwani of Morgan Stanley (MS) reiterated his “overweight” rating and raised the target price on the stock to $500 from $450. The analyst’s new target price is the highest on Wall Street. The revised target price signifies an upside potential of 13.6% from the closing price of $439.96 on February 28. Lalwani’s target price is also much higher than the consensus target price of $443.75 polled by Reuters.

Lalwani outlined various positive factors behind his optimism on the stock including a potential China trade resolution, a stable commercial aerospace backdrop, a healthy free cash flow yield, Boeing’s new mid-sized plane launches, and a rate hike for 737 series models.

CNBC reported that in a note to clients, Lalwani wrote, “though we acknowledge the risk-reward is approaching more balanced levels following the upward move up in shares, the combination of expanding market multiples and on-going management execution raise our comfort with the upside case.”

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JPMorgan Chase is bullish

Morgan Stanley isn’t the first investment research company that has given glowing remarks on Boeing’s growth prospects. On February 11, Seth Seifman of JPMorgan Chase (JPM) also raised his target price on the stock to $450 from $425 due to an improved FCF (free cash flow) outlook for 2020.

In a note to clients, Seifman stated that the company will likely generate a FCF of $16.3 billion or $30 per share in 2020. He thinks that Boeing is positioned to gain from positive aerospace fundamentals. He doesn’t think that the stock is over-owned.

Best Dow 30 index performer

Boeing shares have been rising since the beginning of 2019. The stock has risen 36.4% YTD (year-to-date) and outperformed major US indexes’ returns like the Dow, the NASDAQ, and the S&P 500. So far in 2019, the Dow, the NASDAQ, and the S&P 500 have risen 11.1%, 13.5%, and 11.1%, respectively. The stock has also outperformed the Industrial Select Sector SPDR ETF’s (XLI) returns, which have risen 18.5% during the same period.

Boeing has the highest return among the stocks that make up the Dow 30 Index. With a YTD gain of 21.5%, IBM (IBM) is the second-best performer, followed by Cisco (CSCO) with 19.5% and United Technologies (UTX) with 18%.

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