UBS Sees 50% Upside to Boeing

UBS has raised its rating on Boeing (BA), saying it expects the shares to increase up to 50% as the sector continues to strengthen.

The Swiss bank has a Buy rating on Boeing, up from Neutral, as it lifted its 12-month price target to $515. Shares closed at $331.76 in Wednesday’s session.

"We believe Boeing shares carry the best upside in the sector," analyst Myles Walton said in a note. "Much of the cash growth and margin expansion story (is) set to be unlocked with our $31 per share in free cashflow estimate for 2020, 15 ahead of consensus.”

Walton said that many investors are overlooking the potential upside to aftermarket service contracts. About 60% of the airline manufacturer’s earnings come from selling commercial airplanes. Boeing is aiming for $50 billion per year in services contracts by 2025. UBS expects it to achieve from $35 billion to $40 billion annually by that time.

Still, the core commercial airplane segment is expected to be the stock’s primary driver for growth.

Potential Pullbacks

UBS Noted that Boeing stock could see some pullbacks, but it advised that the declines should be taken as “attractive buying opportunities.” Escalating trade tensions and supplier issues that have caused delays in aircraft deliveries are among the factors that could weigh on shares. (See also: Boeing Stock: Sellers in Control After Earnings.)

Boeing shares are up 38.7% the past year.

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