(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Boeing Co. (BA) shares have soared 80% over the past year, far outperforming the S&P 500's 9.2% gain. But now it seems Boeing is going in reverse. A technical analysis suggests the stock may fall 12% in the next several weeks, pushing shares of aerospace giant down a total of 23% from their high—and thus well into bear market territory.

Analysts have been aggressively upping their price targets on shares of Boeing since June 2017. The wave of optimism has come on the strength of the commercial airline business, as well as saving from a reduced tax rate. According to data from Ycharts, the average analyst price target on Boeing has risen from approximately $200 on July 17, 2017, to roughly $375 today, a rise of nearly 87.5%. 

BA Price Target Chart

BA Price Target data by YCharts

12% Decline

Before the stock may achieve those lofty analyst price targets, shares could be set to fall by nearly 12% to about $285 first. That is because the stock has declined below an important technical support level at $336, to its current price around $325, a decline of 12.6% from its all-time high at nearly $372. 

 

The daily chart shows the near-term trouble Boeing's stock faces, entrenched in a sharp downtrend while resting on technical support around $320 and a long-term uptrend. Should Boeing's stock fall below $320, it would like set off a wave of selling that would pressure shares all the way to range between $285 and $295, a drop of between 9% and 12%. 

Not Oversold Yet

Additionally, the relative strength index (RSI) has been trending lower since peaking at an overbought level around 89. A stock is overbought when the index rises above 70 and oversold when falling below 30. The current reading rests at 42 and suggests the stock has yet to hit oversold conditions. Further, the RSI began trending lower in early January, despite the stock's continuing to rise, which is typically a bearish divergence. 

Historically Not Cheap

Despite having an average price target nearly 15% higher than the current stock price, analysts are relatively neutral when it comes to Boeing. Only 54% of analysts rate the stock a buy or outperform, while 46% have a hold recommendation, according to Ycharts. Those same analysts are looking for significant earnings growth over the next three years, from 18% in 2019 to 16.5% in 2020. But the earnings growth rates also are expected to come on revenue growth of only 5% to 7% over the same period, meaning pressure will be the operational side of the business to deliver. Meanwhile, Boeing's 2019 forward earnings multiple of about 19.3 makes the stock expensive on historical metrics versus an average one-year forward P/E ratio from since April 2015 of only 17.2.

Fundamental Chart Chart

Fundamental Chart data by YCharts

For now, Boeing's soaring stock faces severe near-term headwinds. It means a lot will be riding on the company's next round of quarterly results at the end of April. 

Michael Kramer is the founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance. 

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