Daily Management Review

Boeing Price Target Raised, Could Be A 50 Per4cent Increase In Shares: UBS


The price target for the next 12 months for the aircraft manufacturer Boeing’s shares has been raised to $515 by the analysts at Swiss bank UBS. The price target set by the bank is 50 per cent more than the current price of the shares.
The Swiss bank also increased the rating of a place maker’s shares from the previous option of “neutral” to “buy”. 
"We believe Boeing shares carry the best upside in the sector," analyst Myles Walton said in a note after assuming the bank's coverage of the stock.
"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," the note added.
There was a rise of almost 2 per cent in the shares of Boeing after the releasing of the note to the market as the price shot to $338 a share in pre-market trading.
But there can be some pullbacks because of some short-term concerns which include the slowing down of delivery of aircrafts because of supplier and the potential headwinds that can come with the implementation of trade tariffs, UBS said. However, the bank said that the headwinds and issues should be viewed by investors as "attractive buying opportunities."
Continued growth in air traffic would continue to remain the primary driver of the growth in the crucial commercial plane segment, UBS said. The bank noted that the current rate of growth for the air traffic segment is more than the long term prediction of 5 per cent.
There is also a very good potential for Boeing to add to growth from its aftermarket service contracts – which many of the investors tend to miss out on, despite the fact that revenues from commercial airplanes sale accounts for about 60 per cent of the earnings of Boeing and about 70 per cent of the cash flow of the company.
By 2025, Boeing aims to achieve a target revenue of $50 billion per annum from its services contracts business. While saying that the target set by Boeing is unlikely to be reached, there is enough evidence to suggest that such services could generate anything between $35 and $40 billion for the company by the middle of the 2020s.
The UBS price target of $515 for Boeing shares puts it at the highest of 22 bank price targets published by Reuters. The mean figure among analysts is $410.