There may be good news coming for aerospace stock Boeing (BA). Interestingly, this could also be good news for its immediate competitor, Airbus (EADSY) as well. As it turns out, a large number of wide-body freighter aircraft are reaching the end of their operational lifespan. That could mean some big new sales ahead. But Boeing’s fulfillment problems could be a hazard here, and Boeing shares were down nearly 2.5% in Wednesday afternoon’s trading.
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Basically, a lot of air cargo operators are running into a problem: a lot of their jets are getting old, and Boeing and Airbus both are having trouble rolling out new jets to replace them. Atlas Air chief executive Michael Steen noted that “The supply-demand imbalance for large wide-body freighters will intensify over the next several years.”
At its root, the reason is a perfect storm: not only are Boeing and Airbus having a hard time getting out new planes, but several of the current planes are also up for retirement. Throw in supply chain issues from within the aircraft industry itself, and the end result is $8.3 trillion worth of goods that currently move by air that may have to move in a completely different, and probably slower, way.
Another Monster Order
And then, almost as if underscoring the point, WestJet put in an order for 60 737-10 Max aircraft, along with an option for another 25. Further, WestJet picked up seven 787-9 Dreamliner aircraft as well, and an option for another four of those besides. Boeing, meanwhile, is still running under a production cap of 38 737 Max jets per month. There are signs that that cap may be raised before the end of the year, though.
Alexis von Hoensbroech, CEO of WestJet, noted, “With the addition of these aircraft, WestJet has the largest order book of any airline in Canada and will double our fleet of Dreamliners, underpinning our growth plans and our commitment to affordable travel options for Canadians from coast to coast and exciting career paths for our people. These highly efficient and comfortable aircraft are critical to the growth and renewal of our fleet and will also significantly improve our fuel consumption.”
Is Boeing a Good Stock to Buy Right Now?
Turning to Wall Street, analysts have a Strong Buy consensus rating on BA stock based on 17 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 45.44% rally in its share price over the past year, the average BA price target of $261.24 per share implies 12.69% upside potential.
