How High Could Boeing Stock Go?

How high could Boeing stock go? For the last two years, aerospace manufacturer Boeing (NASDAQ:BA) has seen more than its share of troubles. Between jet safety problems and the effects of the COVID-19 pandemic, the world-renowned jet manufacturer’s stock has languished while the broader market rallied.

This year, though, some analysts and bullish investors believe that Boeing could be poised for a comeback. Here’s what you need to know about Boeing’s stock projections and whether it is positioned to be the surprise growth story of 2022.

Why Investors Aren’t Paying Attention to Boeing

At the moment, investors are ignoring Boeing for several different reasons. First and foremost, the stock has encountered ongoing problems related to the COVID-19 pandemic.

Despite its defense contracts, Boeing is still very exposed to commercial air traffic patterns. As the pandemic continued to slow down travel last year, Boeing was naturally affected. This problem is a large part of the reason that Boeing had a rally early in 2021 before losing steam later in the year.

Quality concerns also continue to plague Boeing. Following two crashes of its 737 Max jet model in 2019, investors have been extremely wary of safety issues in all of Boeing’s planes. This ongoing caution was on clear display in October 2021, when the stock dropped following an announcement of quality issues on some Boeing 787 Dreamliner parts.

Like almost all large manufacturing firms, Boeing is also struggling with supply chain and labor problems. Supply disruptions have been widespread in the aviation industry, causing delivery delays and lower revenues.

Rehiring skilled workers laid off at the beginning of the pandemic has also proven difficult for Boeing and other airplane manufacturers. While these manufacturers will likely be able to rebuild their staff, labor costs are projected to rise as workers seek higher wages and more generous compensation packages to return to work.

Finally, Boeing is struggling under the weight of a mountain of debt. In order to keep itself afloat through the early days of the pandemic, the company had to take on large amounts of new debt. By early 2021, the company’s total liabilities had reached $170 billion, up from just $90 billion in 2017. Even if the company’s other problems resolve themselves this year, the debt load Boeing now has to contend with could put a damper on growth going forward.

Together, these problems have presented an almost perfect storm for Boeing in the eyes of many investors. Pandemic-related uncertainty, manufacturing problems and the lingering concerns over safety and quality have prevented Boeing from experiencing the rally many other stocks have over the past two years. That trend, however, may come to an end in 2022.

Boeing Revenue Growth

Despite being ignored by many investors, projections for Boeing going into 2022 are extremely positive. Average revenue forecasts for 2022 suggest that the company will bring in $86.82 billion. This would be a 33 percent increase from 2021.

Boeing Earnings Growth

Boeing’s earnings estimates are even more positive than projections for its revenues. In 2022, analysts expect the company’s earnings to grow by 341.6 percent. The current estimate also suggests earnings per share of $4.76.

Combined with robust revenue growth, this spike in earnings would almost certainly push Boeing’s share prices higher.

Analyst Targets

Over a 12-month time horizon, the median of 21 current analyst ratings for Boeing is $270.

Against the current price, this represents a potential upside of just under 25 percent. There’s still cause for caution in some ratings, though. The lowest target price for Boeing stock is $163.90, which would represent a loss of over 24 percent from the current price.

How High Could Boeing Stock Go?

While it’s impossible to say how high a stock could hypothetically go, the highest analyst target is usually a reasonable maximum. In Boeing’s case, that would place the stock at a maximum price of $306 in the next 12 months. Compared to the current price, that would represent a gain of over 41 percent in 2022.

Risk Factors

As you can see, analyst forecasts and price targets for Boeing in 2022 are generally bullish. That said, Boeing is far from a risk-free investment at this point.

The largest risk factor for Boeing is likely the Omicron variant of COVID-19 and its potential effects on air travel. Already, staffing issues at large airlines have caused an upsurge in flight cancellations. New restrictions placed on international flights could also complicate traveling by airplane. Cumulatively, the continued problems of the pandemic could cut into demand for new planes and cool Boeing’s revenues or earnings.

Boeing is also stuck trying to balance the costs of expanding production against its debt obligations. At the moment, one of the biggest risks associated with Boeing is its negative free cash flow. In the first three quarters of 2021, Boeing burned through nearly $5 billion in cash. This leaves it with limited room to invest in new production and still service its debts. Taking on new debt could raise the company’s interest payments to unacceptably high levels, especially as interest rates rise.

A final risk factor investors should take into account is the purchasing behavior of the airline industry itself. Like Boeing, the major airlines have had to incur higher costs, take on debt and deal with revenue issues throughout the pandemic. These facts, combined with the remaining safety concerns over newer Boeing jets, could make airlines more likely to refurbish older planes than buy new ones.

Is Boeing Stock a Buy?

At the moment, Boeing stock is a reasonable buy for investors who believe that COVID-19 restrictions and supply chain problems will wind down in 2022. While many companies have already rallied due to economic recovery, Boeing could be a lagging opportunity to take advantage of reopening.

As analyst price targets clearly show, there’s considerably upside to investing in Boeing stock at the moment. With a 25 percent upside on the average rating, there’s even a decent amount of room for Boeing to produce gains if it misses the mark.

Although Boeing has had its share of troubles with plane deliveries, those days may be coming to an end. Deliveries are already rising, and the beleaguered 737 Max model is finally returning to the skies. More deliveries and increased revenues could also help Boeing begin to address its debt problems.

A final reason to be optimistic about Boeing is its defense business. While commercial airlines have faltered, military spending remains strong and will likely continue to benefit Boeing. In late September 2021, the company won a new defense department contract for ongoing maintenance and support of the US C-17 fleet. That contract carried a base value of $3.5 billion, but could potentially be worth almost $24 billion over the next nine years.

Boeing does, of course, have its share of challenges. If 2022 sees ongoing COVID shutdowns or travel restrictions, the outlook for the aviation industry could look bleaker than analysts currently expect. If you’re willing to assume a somewhat higher amount of risk in exchange for the possibility of outsized returns, though, Boeing seems like a decent option at its current price.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.