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$Boeing(BA)$

Big Updates for Boeing Stock Investors

We have some significant updates for Boeing stock investors. The company’s CFO recently provided valuable insights into Boeing’s expected free cash flow and discussed the challenges related to the production and manufacturing of the 737 Max aircraft. I'll dive into the details of what this means for investors and share my updated recommendation for Boeing stock. I’ll also walk you through my proprietary discounted cash flow valuation model, which will give you an idea of what I consider to be the fair value of Boeing stock. Additionally, I’ll evaluate Boeing on a forward price-to-earnings basis and analyze its cash flow from operations over the past 12 months. By combining all of this, I’ll update my recommendation, so let’s get started.

Concerns About Boeing’s Cash Flow

Boeing stock investors had grown increasingly concerned about the company’s cash flow. As you can see from the chart, Boeing’s trailing 12-month cash flow from operations showed a significant downturn. This decline started when manufacturing delays and performance issues began to impact the company. Boeing faced challenges with aircraft failures and disasters that customers experienced, leading to increased regulatory scrutiny and forced improvements. As a result, the company saw a drastic negative cash flow of $12 billion in its most recent 12-month period.

Positive News from the CFO

However, on March 19, 2025, CFO Brian West spoke at an investor conference, where he shared positive updates. He confirmed that Boeing’s cash burn rate is easing, signaling that the situation is improving and may eventually turn positive again. Additionally, he mentioned that the production of the 737 Max is on track to reach 38 units per month, despite prior supply chain and regulatory challenges. Boeing also anticipates that its March deliveries will align with February's figures, which included 44 aircraft, 32 of them being 737 models. These developments were well-received by investors, with Boeing’s stock rising by 6% in response.

Challenges Remain for Boeing

While this is encouraging news, Boeing still faces significant challenges. As you can see, the cash flow from operations remains deeply negative due to the company’s past troubles. However, if we take a step back, Boeing is still an incredibly strong business. It essentially has only one competitor—Airbus—and both companies have backlogs of orders that stretch for a decade or more, totaling hundreds of billions of dollars. The demand for their products far exceeds supply, with Boeing struggling to catch up on orders placed years ago. This is a positive aspect for the business: limited competition and strong customer demand, which should ensure business stability over the long term.

Production & Delivery Constraints Boeing has struggled to ramp up production, especially for its 737 Max and 787 Dreamliner models, due to supply chain shortages and quality control issues. The company has faced delays in aircraft deliveries, impacting its ability to recognize revenue on schedule.

Regulatory & Safety Issues Increased oversight from regulators, including the FAA (Federal Aviation Administration), has slowed down production approvals and certification processes. The recent door plug blowout incident on an Alaska Airlines 737 Max 9 heightened scrutiny, leading to temporary groundings and additional safety checks, delaying aircraft deliveries.

Weak Defense & Space Segment Performance Boeing’s Defense, Space & Security division has faced cost overruns and program delays, dragging down overall revenue. Issues with key defense contracts, such as the KC-46 tanker and the Starliner spacecraft, have negatively impacted earnings.

Execution is Key to Boeing's Future Success

The key for Boeing now is execution. The company needs to efficiently manufacture planes and fulfill orders without further disruptions. If Boeing can execute well, the business could flourish. Historically, its returns on invested capital (ROIC) have been outstanding, once exceeding 80%, a level that's considered exceptional. Currently, the only company I follow with a higher ROIC is NVIDIA, which surpasses 100%. This speaks to Boeing’s strong competitive advantages and robust cash flow from operations. The core of the business is solid, and if Boeing can keep costs under control and fulfill orders effectively, it has the potential to thrive.

Technical Analysis

After a bullish engulfing pattern marked the end of a three-week pullback in Boeing shares earlier this month, the stock has continued to rise, closing above both its 50-day and 200-day moving averages in Wednesday's session. Notably, the moving averages formed a golden cross early last month, a chart pattern that typically signals the start of a new uptrend.

What’s significant today is that the price movement was accompanied by the highest volume in over two weeks, suggesting buying interest from larger market players, including institutional investors and hedge funds. Additionally, the relative strength index (RSI) has risen back above the 50 mark, further confirming the bullish price momentum.

Next, let's take a look at key support and resistance levels that technical analysts may be focusing on.

Additional buying pressure could drive the stock towards the $192 mark, where it may face resistance near several peaks that formed on the chart between late March and early August of last year. This level is also just above last month’s high.

Lastly, a breakout above this resistance could push Boeing shares toward the $217 level. Investors who purchased the stock at lower prices may consider exit points in this area, which aligns with a horizontal line connecting the late-August 2023 trough to the late-January 2024 countertrend high.

Discounted Cash Flow Valuation

When I applied my discounted cash flow (DCF) valuation model to Boeing, I calculated its intrinsic value at $141 per share. After today's market increase, the current price is $171. Based on my DCF analysis, this suggests that Boeing stock is slightly overvalued. Despite this, investors haven't sold off the stock as much as might be expected. If Boeing didn’t have such significant order backlogs and a strong competitive position, the stock price would likely have fallen more sharply. However, the company's solid business model and competitive advantages have helped maintain its valuation, even amid the challenges and large declines in cash flow from operations.

Market Sentiment

Cash Flow and Operational Challenges: Despite recent improvements, Boeing's cash flow has been deeply negative in the past, reflecting challenges in manufacturing, regulatory hurdles, and past performance issues. The company has yet to fully resolve these and is working to regain stability.

High Valuation: With a forward price-to-earnings (P/E) ratio of 40, some investors view Boeing's stock as overvalued, considering the difficulties the company continues to face. This caution stems from uncertainty over whether Boeing can fully address its operational challenges without further mistakes.

Execution Risk: There's a sense of caution among investors who are uncertain about Boeing's ability to execute its recovery plan efficiently. There are concerns about potential future missteps as the company rushes to fix ongoing issues.

Forward Price-to-Earnings Ratio

Looking at the forward price-to-earnings ratio, Boeing is trading at a relatively high multiple of 40, which is somewhat rich. Of course, Boeing deserves a premium valuation due to its status as a premium business. However, given the current difficulties the company is facing and the ongoing efforts to resolve them, investors are uncertain whether they will succeed in getting back on track. I’m not fully convinced that they won’t encounter more issues in the near term, especially as they work quickly to address these problems and avoid losing $12 billion annually in operations.

Conclusion and Updated Recommendation

While today’s news is positive for Boeing stock investors, it’s not enough for me to change my stance. I’ve maintained my “hold” rating on Boeing stock, and I’m reaffirming that recommendation today, as I still believe the stock is best kept as a AVOID.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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