Boeing stock (NYSE: BA) is currently trading at $170 per share, which is around 35% below its level in March 2021. In comparison, its peer GE Aerospace stock (NYSE: GE) saw its stock surge 2.5x over the same period. Boeing’s stock was trading lower at around $137 in June 2022, just before the Fed started increasing rates. It is now roughly 25% above that level. To return to pre-inflation shock levels, BA stock will need to gain around 60% from its current price. Analysts believe it will take a while for Boeing to reach those levels, considering the turbulent market conditions seen in 2022. The stock’s performance during the 2008 recession is being compared to its current performance.
Boeing’s stock performance has been inconsistent, with returns of -6% in 2021, -5% in 2022, and 37% in 2023. In comparison, the S&P 500 had returns of 27% in 2021, -19% in 2022, and 24% in 2023. Despite underperforming the S&P 500 in 2021, individual stocks have found it challenging to consistently beat the benchmark index in recent years. However, a group of stocks in the Trefis High Quality Portfolio has outperformed the S&P 500 each year over the same period. The HQ Portfolio has provided better returns with less risk, indicating a more stable performance.
Given the current macroeconomic uncertainty and Boeing’s own issues with the 737 MAX, there is speculation on whether BA will underperform the S&P over the next 12 months or see a recovery. From a valuation perspective, BA stock appears to have room for growth. Analysts estimate Boeing’s valuation to be $210 per share, reflecting a potential upside of more than 20% from its current levels. This forecast is based on a valuation multiple of 1.6x revenues for BA, slightly lower than the average value over the past five years. With ongoing curbs by the FAA impacting near-term profitability, a decline in the valuation multiple from historical averages is considered justified.
The 2022 inflation shock has seen numerous challenges, with inflation levels peaking at 9% in June, the highest in 40 years. The Fed has been hiking interest rates aggressively to address these issues, leading to market fluctuations. In contrast, during the 2007-08 crisis, BA stock declined significantly but recovered post-crisis. Boeing’s fundamentals have seen revenue growth, although the FAA cap on Boeing may impact sales growth in 2024. Despite ongoing issues, Boeing appears to have a sufficient cash cushion to meet its obligations through the inflation shock.
With the Fed’s efforts to control inflation rates and improve market sentiment, analysts believe that BA stock has the potential for further gains once fears of a potential recession ease. However, unfavorable macroeconomic factors and ongoing issues with the 737 Max production could weigh on Boeing’s stock in the near term. While BA stock may see higher levels, it is essential to compare Boeing’s performance with its peers to assess its overall strength in the market. Investors are advised to consider all risk factors before making investment decisions.
