Boeing (BA) 737 Max groundings by the Federal Aviation Administration after the Alaska Air (ALK) accident is a “worrisome” start to the new year, BofA Securities said in a note.
Analysts, including Ronald J. Epstein, said that while they see the stock to be weak on the news, they do not expect the issue to have a material impact on their 2024 financial forecast.
“Boeing is one of two players in a global duopoly for commercial aircraft which are in short supply, and we believe has been making steady if not slow progress addressing the some of the internal shortfalls that led to its current situation,” the analysts said.
The incident closely follows Boeing’s call to airlines to check for loose bolts on 737 MAX rudder systems as well as the company’s request to the FAA for an exemption to safety standards related to engine inlets and anti-ice systems, the analysts said, adding that all this could erode “the fragile confidence” around the 737 MAX franchise.
“Boeing needs to tread carefully and cautiously through this potential reputational minefield,” the analysts said.
They added that while the incident is not expected to impact orders given the “duopoly,” flyers might eventually lose confidence, which could ultimately impact sales.
The firm is maintaining its buy rating with $275 price target.