Several analysts have downgraded their ratings as well as target price on Boeing (BA) stock after the Ethiopia crash on March 10. Among the 26 analysts covering Boeing, five recommended a “strong buy,” 13 recommended a “buy,” six recommended a “hold,” and the remaining two recommended a “strong sell.”
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However, before March 10, of the 24 analysts covering Boeing stock, seven had given it a “strong buy,” 12 had given it a “buy,” and the remaining five analysts had given it a “hold” rating. The air defense contractor stock saw its first “sell” rating in the last 19 months. The average target price on the stock has fallen to $430.48 from $443.75 on March 10.
In the last one month, Boeing has lost two long-term bullish backers. Today, Bank of America (BAC) analyst Ronald Epstein downgraded his rating on the stock to “neutral” from “buy,” saying that normalization in 737 Max deliveries would take longer than he had anticipated earlier. Before this on March 19, John Eade of Argus Research lowered his rating on Boeing to “hold” from “buy” due to the company’s weak response to two deadly crashes involving its fast-selling 737 Max.
Boeing is going through one of the worst periods in its history. The airplane manufacturer (XLI) is facing worldwide grounding of its 737 Max series planes. Moreover, federal agencies are looking into whether there have been lapses or misconduct on the part of Boeing or regulators while gaining the approval for its flight-control system, which is called the maneuvering characteristics augmentation system.
Analysts were too bullish
Analysts were very optimistic about Boeing stock before the Ethiopia crash. Various analysts gave glowing remarks to the company after it announced record deliveries for 2018 along with production and pricing increases for 737 MAX series planes in January. Big research firms including Morgan Stanley (MS), UBS, Credit Suisse (CS), and JPMorgan Chase (JPM) had raised the target price while reaffirming a “buy” or equivalent rating on the stock.
The majority of brokerage firms had thought that Boeing’s revenues and free cash flow would improve due to a robust commercial aerospace demand environment. Research firms expected the higher 737 Max pricing and production rate to bring in additional revenues and cash flows.