Boeing ( BA -1.86% ) shares gained nearly 5% on Monday morning after the UBS upgraded the aerospace stock to a buy. The ingredients needed for a comeback are falling into place, and Wall Street is getting behind Boeing again.
It's been a rough couple of years for Boeing and its shareholders. The company was hit first by the grounding of the 737 MAX, and then by the COVID-19 pandemic and its impact on the airline industry. The stock lost nearly 75% of its value briefly in the early days of the pandemic, and is still off 26% for the year.
But the news flow for Boeing has improved of late. The 737 MAX is flying again after 20 months on the ground, and airlines are seeing the early signs of a recovery that should intensify as the COVID-19 vaccine is rolled out in the months to come.
UBS analyst Myles Walton has seen enough to climb on board, on Monday upgrading Boeing shares to a buy from neutral and establishing a $300 price target, up from a previous $150. Walton said free cash flow should improve considerably with the 737 MAX flying again, and the vaccine should be a catalyst to restart the airlines and get new plane sales booming again.
There's good reason for optimism, but investors shouldn't underestimate how long it will take to really pay off for Boeing. The company just days ago said it would consider selling additional shares to pay down some of the massive debt load it has taken on to weather the crisis, and is cutting production rates on key products in anticipation of a multi-year aerospace down cycle.
Even as they recover, the airlines also have ballooning debt totals, and will need to be conservative about expansion even as traffic rebounds.
The worst is over for Boeing, but the journey ahead still includes a lot of turbulence. Be cautious buying in today and expecting a quick return on the investment.