What happened:

Shares of aerospace and defense company Boeing (NYSE:BA) fell 8.3% in morning trading after Wells Fargo analyst Matthew Akers downgraded the stock’s rating to Underweight (Sell) from Equal Weight (Hold) and cut the price target to $119 from $185. The new price target represented a potential downside of 25% from the price at the time of the downgrade. The analyst raised concerns about cash flow related to BA’s efforts to build new aircraft.

The analyst added: “Boeing (BA) has had an unprecedented opportunity for free cash flow this decade, driven by increased production of mature aircraft and low capital expenditure requirements… But after significant delays and cost overruns, we are now seeing growing cash flow from production leading into a new aircraft capital expenditure cycle that will cap free cash flow in a few years.”

Looking ahead, the analyst predicts that Boeing may need to issue more shares (potentially resulting in dilution for existing shareholders) to strengthen its balance sheet and fund future aircraft investments.

The stock market overreacts to news, and large drops in prices can provide good opportunities to buy high-quality stocks. Is now the right time to buy Boeing? Find our full analysis report here, free of charge.

What does the market tell us:

Boeing shares are somewhat volatile, having experienced six swings of over 5% in the last year. With that in mind, today’s move suggests that the market considers this news significant, but not something that would fundamentally change its perception of the company.

Boeing has fallen 36% year-to-date and is trading at $160.98 per share, 39.1% below its 52-week high of $264.27 set in December 2023. Investors who bought $1,000 worth of Boeing stock 5 years ago would have an investment worth $454.21 today.

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