Boeing Loses Another Bull as BofAML Sees Longer 737 Max Recovery

Apr 08 2019, 11:17 AMApr 08 2019, 11:57 AMApril 08 2019, 11:17 AMApril 08 2019, 11:57 AM

(Bloomberg) -- Boeing Co.’s disruptions to its 737 Max deliveries will likely last longer than initially expected, BofAML analyst Ronald Epstein wrote in a note Monday, downgrading the stock to neutral from buy. Boeing shares fell in pre-market trading.

“Regaining the Boeing 737 Max airworthiness certificate is not just a simple
software fix,” Epstein warned in a client note. Boeing on Friday cut its output of 737 jetliners after two fatal crashes forced regulatory agencies to ground the aircraft. The BofAML analyst also slashed his 12-month price target to $420 from $480, compared with the average price target of $432, according to data compiled by Bloomberg.

Epstein now expects a six- to nine-month delay for 737 Max deliveries, he had initially thought there might be a lag of three to six months. Such a delay means an inventory buildup that won’t start recovering until 2020, and may also “lower margins due to penalties owed to customers, weaker negotiating position with airlines as airlines consider cancellations, and operational inefficiencies from the production disruption,” he cautioned.

Boeing shares fell 3.8 percent to $377.32 at 7:13 a.m. in New York. The stock has lost 7.2 percent since the Ethiopia crash, the second fatal crash of a 737 Max jet.