20240110 boeing
The most recent troubles started early this year, after a panel covering an unused door blew out mid-air during an Alaska Airlines flight. Image Credit: Bloomberg

The ceaseless turmoil at Boeing Co. has put the planemaker's shares on their worst run in more than five years, harking back to when its 737 Max aircraft was involved in a deadly crash off Indonesia.

Since then, the company has careened from crisis to crisis, battering the stock that now trades 60 per cent below the record high touched in March 2019. The most recent troubles started early this year, after a panel covering an unused door blew out mid-air during an Alaska Airlines flight. The near-calamity has led to regulatory probes, a sweeping management overhaul and a wider lack of confidence in the company's safety culture.

As a result, Boeing shares are down 34 per cent year-to-date, making it the second worst performer on the S&P 500 Index. On Friday, the stock dropped for the 10th straight session, putting it on track for its longest losing streak since November 2018. Just this month, Boeing reported its lowest deliveries in the first quarter since mid-2021, and an engineer at the company made allegations that brought its 787 Dreamliner aircraft under scrutiny as well.

"Boeing's first-quarter delivery announcement confirmed what the market has come to accept over the past two to three months, which is that the pace of activity at its Commercial Airplanes segment is slow," Seth Seifman, an analyst at JPMorgan Chase & Co., wrote in a note on Thursday.

"The path forward on production is not very clear, and while demand should allow for significant growth over time, investors should keep nearer term expectations in check," the analyst added. Seifman lowered his price target on the stock, but kept his buy-equivalent rating.

Overall, Wall Street analysts are turning cautious. The share of buy recommendations on Boeing shares is now at the lowest since November 2021, hold ratings have almost doubled this year and the average price target has fallen 14 per cent, according to data compiled by Bloomberg.

Meanwhile, earnings expectations have tumbled. Analysts' average 2024 adjusted profit estimates have dropped a staggering 83 per cent over the past year, while revenue expectations have taken a 5 per cent cut.

All of it is weighing on the shares.

"A lower multiple is justified given uncertainty and risks related to the management change and ongoing investigations," said Ronald Epstein, an analyst at Bank of America Corp. "Further, we feel there is downside risk to our cash flow projections." Epstein also lowered his price target on Boeing this week.

Still, despite all the chaos and challenges, analysts agree that the longer-term outlook for the company remains bright. Which explains why even after this year's continuous barrage of negative headlines, buy ratings still comprise more than 60 per cent of all recommendations on the stock.

Boeing's advantage is that demand is expected to stay in its industry, with the order book for top competitor Airbus SE already sold out into the end of the decade. And entering the plane-making business isn't an easy one, which rules out the possibility of any sudden new rival.

"The company will be able to continue to benefit from the robust global air travel demand environment and, in the long run, benefit from improved quality assurance," BofA's Epstein said. "In the short- to medium-term, however, there are risks."