Is Weakness In Boeing A Sell Signal Or Buying Opportunity?

Shares of Boeing Co BA peaked at $371.60 and have since been a victim of the overall "choppy equity market," which shouldn't necessarily come as a surprise, according to Morgan Stanley.

The Analyst

Morgan Stanley's Rajeev Lalwani maintains an Equal-weight rating on Boeing's stock with an unchanged $373 price target.

The Thesis

Boeing's stock has been impacted by multiple factors, Lalwani said in a research report. They are:

• Exposure to economic and aviation growth.
• Aluminum and steel tariffs.
• The potential worsening of international relations, given the company's more than 50-percent exposure to foreign markets.
• Supplier risk from headwinds at Arconic and Spirit Aerosystems, among others.

While Boeing's potential troubles are legitimate, they appear to be "manageable," as tariffs on aluminum and steel are "minor factors" for the company, as it holds multiyear agreements with suppliers, the analyst said. China has "limited options" in terms of aircraft it can buy, as Boeing and rival Airbus are essentially a duopoly, he said.

Iran's state-owned airline has ordered $8 billion in aircraft, Lalwani said. 

Boeing's stock will likely see continued volatility in the near-term, but the company's medium- to long-term free cash flow story should remain intact, the analyst said.

Investors could hold on to a "relatively constructive stance" on the stock and wait for clarity on policy and a "clearer path" to the $373 price target, with the potential to reach a bull case scenario of $450 per share over the coming years, according to Morgan Stanley. 

Price Action

Shares of Boeing were trading lower by 5.3 percent near the end of Thursday's trading session. 

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