Aerospace giant Boeing (BA 0.25%) has struggled for years with quality control and a debt-heavy balance sheet. One recent mishap, a blown-out door plug on a 737 Max 9 plane, led to a leadership change that will see CEO Dave Calhoun step down at the end of the year.
Analysts at Citi remain optimistic that Boeing can turn things around in the long run, although they noted on Thursday that there are no easy fixes for the company's problems. Citi maintained a buy rating on the stock but lowered its price target from $263 to $252 to reflect Boeing's ongoing problems. That lower price target still represents an upside of about 31% over the next 12 months or so.
Minimal competition
The crux of Citi's argument for buying Boeing stock rests on the fact that the company has only two major competitors and that demand for commercial jets remains robust. Boeing competes with Airbus and Embraer for aircraft orders from the world's airlines.
Orders are often placed years in advance, so short-term stumbles won't matter much in the grand scheme of things. However, Boeing has been having issues with its 737 Max planes since two fatal crashes in 2018 and 2019. A New York Times report on Thursday detailed the manufacturing shortcuts the company has taken and its habit of pushing its employees to finish planes faster. As incidents on 737 Max planes pile up, both airlines and passengers may lose confidence in the company's planes.
Is Boeing stock a buy?
Citi believes that Boeing will eventually fix its execution issues, and at that point, the focus from investors will be on the company's progress in fixing its balance sheet.
For patient investors who see Boeing successfully revamping its processes and finally fixing the myriad problems with its 737 Max planes, the stock could be an attractive turnaround play. But Boeing's comeback could take years, and it may lose business to competitors in the meantime. Citi may be too optimistic in forecasting that level of recovery in just one year.
