Why Cowen Is Bullish On Boeing: '2022-24 Look Brighter'

Boeing Co BA shares traded higher by 3.2% on Tuesday after the stock got a big upgrade on Wall Street.

The Analyst: Cowen analyst Cai von Rumohr upgraded Boeing from Market Perform to Outperform and raised his price target from $240 to $290.

The Thesis: Von Rumohr said Boeing has a path to potentially reach $21 of cash flow per share by 2024 as demand recovers. For now, he said Boeing investors need to take a long-term approach.

“Fast improving air traffic is bolstering aircraft demand; and while lingering FAA oversight and timing of China's MAX approval limit upside to 2021, 2022-24 look brighter,” he wrote in a note.

In addition to rising air traffic, von Rumohr said improving new plane economics, low interest rates and lower carbon emissions are all adding to aircraft demand. He said overhangs from FAA halts to 737 MAX and 787’s should start to ease in the second half of 2021. China approval of the 737 MAX is also a near-term headwind, but he believes China will likely approve the MAX at some point.

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For now, von Rumohr said Boeing’s stock price will likely trade in-line with the latest air traffic trends. With the U.S. already surpassing a 50% vaccination rate, those traffic gains are starting to accelerate as the summer travel season ramps up.

Cowen is predicting Europe and China will hit 50% vaccination levels within two months and five months, respectively. In the longer term, the International Air Transport Association is expecting global air traffic to exceed 2019 levels by 2023.

Benzinga’s Take: Much like airline stocks, Boeing shares have bounced back tremendously from their March 2020 lows as investors anticipate a sharp recovery in 2021 and beyond.

The biggest question marks at this point are just how long will it take for global air traffic to recover to 2019 levels and how much of that recovery is already priced into Boeing’s stock.

Photo by Steve Lynes via Wikimedia.