Boeing stock (NYSE: BA) has declined by 10% from early January 2021 to around $190 now, compared to a 40% increase for the S&P 500 over the same period. This underperformance is due to a 30% decrease in its P/S ratio and ongoing issues with the 737 MAX. Returns for BA stock have been inconsistent, with -6% in 2021, -5% in 2022, and 37% in 2023. In contrast, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023, showing that BA underperformed in 2021.
Despite challenges faced by individual stocks in recent years, the Trefis High Quality Portfolio has consistently outperformed the S&P 500 annually, providing better returns with less risk. With an uncertain macroeconomic environment, including high oil prices and elevated interest rates, there are concerns about whether Boeing will underperform the S&P in the next 12 months or recover. From a valuation standpoint, BA stock appears undervalued.
Boeing’s revenue increased by 34% from 2020 to 2023, driven primarily by growth in the Commercial Airplanes segment. However, following incidents involving Boeing 737 Max aircraft, such as cabin side panel detachment and fuselage quality issues, there are uncertainties and likely delivery delays in 2024. Boeing plans to acquire Spirit AeroSystems, one of its suppliers, to address the quality issues and ramp up production to meet targets.
Despite these challenges, a valuation of $259 per share for Boeing reflects an upside of more than 35% from current levels, based on 2.0x revenues for BA. While it is unlikely that Boeing will meet its delivery targets this year, the company’s backlog remains strong at over $500 billion, indicating a demand for new airplanes. Investors may consider entering BA stock during the current dip for long-term gains.
In light of the ongoing issues with 737 Max and the impending leadership change with Boeing CEO Dave Calhoun reportedly stepping down, there are headwinds for Boeing in the near term. However, the market demand for new airplanes remains high with potential for long-term growth. Despite the challenges faced by Boeing, much of the negatives seem to be factored into its current stock price, presenting an opportunity for investors to benefit from potential future gains.
Investors interested in Boeing stock may also consider comparing it to its peers in the industry to make informed investment decisions. With a forecasted valuation of $259 per share and potential upside of over 35% from current levels, Boeing presents a compelling opportunity for long-term growth, despite short-term challenges. By analyzing key metrics and industry comparisons, investors can assess the potential of Boeing stock within the aerospace sector.
