Morgan Stanley Weighs In on Boeing Stock Following Air India Crash
Boeing (NYSE:BA) marked a major milestone last month as the one-billionth passenger flew on its 787 Dreamliner – a big achievement for an aircraft that's only been in service for 14 years. Up until yesterday's tragic Air India crash in Ahmedabad, the 787 Dreamliner had built a strong reputation as a reliable workhorse for long-haul routes with an outstanding safety track record.
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It's important to note that this is a different aircraft from the Boeing 737 Max, which made headlines after the deadly crashes in Indonesia and Ethiopia in 2018 and 2019, claiming hundreds of lives. At this stage, there's no indication that Boeing is at fault for yesterday's incident in India. A clearer picture of what happened is expected to emerge once investigators retrieve the plane's black boxes – the onboard recorders that store critical flight data and cockpit audio.
With BA shares taking a beating following the crash, Morgan Stanley analyst Kristine Liwag set out to get an idea of how investors feel about the stock right now.
'While our thoughts remain focused on those affected by the tragedy,' the 5-star analyst said, 'the feedback from investors is considerably less negative than after previous Boeing 737 MAX incidents.'
On the positive side, given the strong safety history of the 787, many investors believe the stock's dip is an overreaction, especially as production of the 737 MAX continues to gain momentum. Footage of the incident appears to show a controlled descent, which could suggest that the cause may not be related to a systems failure on the aircraft itself.
But the negative take is that incidents like this highlight the stock has a 'higher beta than in previous cycles,' i.e., heightened sensitivity to headlines. Boeing remains 'in the penalty box' due to prior incidents and with a range of pureplay aerospace alternatives available, many would prefer to remain on the sidelines for now.
Plenty of questions remain for now. Some observers have noted that the aircraft appeared underpowered during its controlled descent. Investors are asking whether the problem could be related to the engines, maintenance or repair (MRO) issues, or possibly a bird strike. The Air India 787 is equipped with GE Aerospace engines.
'We will continue to monitor developments of the investigation,' Liwag summed up.
All in, Liwag assigns an Equal-weight rating (i.e., Neutral) with a $200 price target, suggesting that the stock is fully valued at current levels. (To watch Liwag's track record, click here)
While two other analysts also remain on the sidelines, they're outnumbered by 16 who are bullish on the stock. With just one dissenter issuing a Sell, the result is a Strong Buy consensus. Looking ahead, the average price target of $220.95 implies a potential upside of 10.5% over the next year. (See Boeing stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks' Best Stocks to Buy, a tool that unites all of TipRanks' equity insights.
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