Boeing Stock Price Forecast September 2021 – Time to Buy BA Stock?

With a year-to-date rise of only 7.6%, Boeing (BA) stock is underperforming the markets by a wide margin. While the US stock markets are trading near their all-time highs, and have closed with gains for seven consecutive months, BA stock is down 21.6% from the 2021 highs and is in a bear market territory.

What’s the forecast for Boeing stock and is it a good time to buy the stock after the massive underperformance?

Aviation sector

The aviation sector has gone through a lot of pain since the COVID-19 pandemic began. The paid spreads across the entire ecosystem. As carriers globally were grounded amid the lockdowns, airline companies took a massive hit to their earnings. A lot of airline companies went bankrupt while others managed to get state support to stay afloat.

As cash-starved airline companies went slow on the acquisition of new aircraft, it hit the fortunes of aircraft manufacturers like Boeing and Airbus. Lower aircraft build rates also hit component suppliers. Rolls-Royce that supplies engines for aircraft fell to historic lows, while General Electric’s aviation segment also reported a fall in profitability.

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Warren Buffett

Warren Buffett hasn’t been immune to the woes of the aviation industry. Last year, Buffett sold off all the four airline companies that Berkshire Hathaway was holding at a massive loss. The conglomerate also took a nearly $10 billion write-down on its investment in Precision Castparts that makes components for aircraft.

Just when the world thought that the worst of the pandemic is behind us, the Delta variant hit the world. The recovery in the global aviation industry is not as strong as markets believed in the first quarter of 2021. Stocks in the aviation industry, including Boeing, have come off their 2021 highs as markets brace for a slower recovery in the sector.

Boeing stock price recent developments

In July, Boeing reported its second-quarter earnings and said that it added 180 new orders which took its total backlog for commercial aircraft to $285 billion. The company’s revenues increased 12% year-over-year to $32.2 billion in the first half of 2021. It posted an operating profit of $940 million during the period as compared to an operating loss of $4.3 billion in the corresponding period in 2020.

“While our commercial market environment is improving, we’re closely monitoring COVID-19 case rates, vaccine distribution and global trade as key indicators for our industry’s stability,” said Boeing CEO David Calhoun.

Boeing stock price forecast

Wall Street analysts have a split rating on Boeing stock amid the uncertainty over the near-term outlook for the aviation industry. Of the 25 analysts polled by CNN Business, 13 rate BA stock as a buy or some equivalent. 10 rate it as a hold while the remaining two analysts rate Boeing as a sell.

Boeing has a median target price of $274 which is a premium of 25.6% over current prices. Its street high target price of $314 is an upside potential of almost 44% while the lowest target price $191 is a discount of 12.4%.

Recent analyst action

Last month, JPMorgan Chase had set Boeing’s target price at $270. In July, Morgan Stanley reiterated its bullish bet on Boeing stock and said that the stock looks attractive after having fallen sharply from the highs. “Narrowbody demand is strong, investor sentiment is negative, and the stock is oversold this week on the back of no changes in fundamentals,” said Morgan Stanley in its note.

In May, Citi raised the stock’s target price from $200 to $240 but maintained its neutral rating. “Our Target Price of $240 gives some upside, but expect lots of volatility – the high 2021 debt level will tend to lead to undervaluing the shares; 2022/23 cash flow will tend to lead to over-valuing the shares – we believe investors need to look through both the near-term negatives and medium-term positives,” said Citi in its note.

Boeing 737 Max

Apart from the macro sell-off in the aviation sector, Boeing has also been volatile due to the developments related to its Max 737 which was involved in unfortunate crashes. Gradually, several regulators have approved the model with Singapore being the latest. However, in a setback for the model, Ryanair has terminated an order for the model after the two parties failed to reach an agreement over the pricing. The budget airline was looking to order as many as 250 Max 737 aircraft.

BA stock price long-term forecast

Analysts expect BA’s revenues to rise 30.5% in 2021 and 20% in 2022. That said, the rise is coming from a lower base as the company’s revenues had fallen 24% each in 2020 and 2019. While the COVID-19 pandemic took a toll on the earnings in 2020, in 2019, Max 737-related issues took a toll on the company’s earnings.

Meanwhile, the long-term outlook for Boeing looks positive considering the increasing air travel in emerging markets. As more people take to air travel in emerging economies, airline companies in these countries are placing massive orders for new aircraft.

Boeing stock price valuation

Boeing stock currently trades a NTM (next-12 months) EV (enterprise value)-to-EBITDA multiple of 18.2x. The multiples have averaged 21.1x, and 17.4x over the last three and five years respectively. The valuation multiples look reasonable and there is potential for multiple expansion if the global economic recovery continues to strengthen.

BA technical analysis

BA is among the best ways to play the reopening story. Looking at the charts, the stock is not looking bullish though. The stock’s 50-day SMA (simple moving average) has fallen below the 200-day SMA which bearish technical indicator known as a “death cross.” While it is a lagging indicator, it often signals a long-term bear market. In November 2020, there was a “golden cross” formation in Boeing stock, which is a bullish indicator and happens when the 50-day SMA crosses above the 200-day SMA.

The stock had surged after the golden cross formation. However, currently, it is looking bearish and has been making lower highs after each pullback. The 14-day RSI (relative strength index) for Boeing is 44.3 which is a neutral indicator.

All said the recent weakness in BA stock could be a buying opportunity. The stock falls further on technical weakness, long-term investors can add more to their positions and bet on a revival in the aviation industry.

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