By Tomi Kilgore
Stock falls more than 20% from December high after Wells Fargo analyst cuts rating, price target to the lowest on the Street
Shares of Boeing Co. kept falling Tuesday, enough to enter “bear-market” territory, after a downgrade by Wells Fargo, which said there’s a good chance the Federal Aviation Administration’s investigation won’t be “clean.”
The FAA’s probe “increases significantly” the risk that production and deliveries will be curtailed, analyst Matthew Akers wrote, in a note titled, “FAA audit opens up a whole new can of worms.” He doesn’t see enough upside for Boeing’s stock to justify that risk.
The aerospace and defense giant’s stock (BA) sank 7.1% in morning trading toward a two-month low. The $15.36 price decline was shaving about 101 points off the price of the Dow Jones Industrial Average DJIA, which fell 126 points, or 0.3%. (Read more about how Boeing’s stock can affect the Dow.)
The stock has plunged 23.4% from the 2 1/2-year closing high of $264.27 on Dec. 15, highlighted by the blowout of a fuselage panel while a 737 Max 9 was in flight and the FAA’s announcement of a formal investigation.
Many on Wall Street define a decline of 20% or more from a bull-market closing high as a bear market. The Dec. 15 close was 48.7% above the Oct. 25, 10-month closing low of $177.73.
Read: Boeing’s stock should be in the penalty box for now, investment manager says.
Wells Fargo’s Akers downgraded Boeing’s stock to equal weight, after being a buy since November 2021. He cut his price target by 20%, to $225 from $280, with the new target now the lowest of the 32 analysts surveyed by FactSet who cover the company.
“[The] FAA’s audit is limited to MAX 9 for now, but its feasible that findings could expand the scope to other MAX models sharing common parts,” Akers wrote in a note to clients. “Given [Boeing’s] recent track record, and greater incentive for FAA to find problems, we think the odds of a clean audit are low.”
Akers also cut his forecast for 2024 free cash flow to $5.8 billion from $6.8 billion, which is now below the FactSet consensus of $5.9 billion.
Given the FAA’s probe and the comment that safety, not speed will determine when the 737 Max 9 will fly again, Akers expects a “slower resolution” than what history might suggest.
Boeing’s stock has tumbled 22.4% so far in January, which puts it on track for the biggest monthly decline since it dove 24.4% in September 2022. In comparison, the Industrial Select Sector SPDR ETF XLI has lost 2.4% this month and the Dow has slipped 0.6%.