BofA Lifts Boeing Price Target, But Cautions 'Risks Remain'

The entire commercial air traffic sector is benefiting from a near-term lift and the improved sentiment bodes well for stocks like Boeing Co BA, according to BofA Securities.

The Boeing Analyst: Ronald Epstein maintains a Neutral rating on Boeing's stock with a price target lifted from $210 to $265.

The Boeing Thesis: Multiple data points confirm that travel activity has rebounded from the COVID-19 pandemic lows, Epstein wrote in a note. For example, TSA checkpoints are up 20% year-over-year although still 50% below pre-pandemic levels. BofA credit and debit card airline spending is up 13% year-over-year, but still 45% lower from 2019 levels.

A full recovery from 2020 lows may take time, but it is heading in the right direction. As such, investors may want to "ignore everything until it gets back to normal," but still assume that "risks remain."

Ironically, this was the general sentiment for Boeing investors prior to the pandemic as investors were already considering 2023 as a year for "normalized" free cash flow.

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BofA is currently modeling FCF to the sales conversion ratio of 6% in 2024 and 8% in 2025. Both estimates are above the company's last 40-year average of 5% (excluding 2020). The main reason why the research firm's estimates are above historical norms is that an approximate $2 billion R&D placeholder in each year for the 797 plane and other efforts won't impact inventories related to the developments.

BA Price Action: Shares of Boeing were trading up 3.25% Thursday afternoon at $247.19.

(Photo: Boeing)