Boeing stock spikes after analyst upgrade: time to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jun 2, 2021
  • Boeing shares spiked more than 3% on Tuesday after Cowen analyst upgraded to a buy rating.
  • This rating is based on an expected change in the airline industry with new airplanes replacing old ones.
  • The analyst has a price target of $290, which is far from last year’s pre-pandemic highs of $348. Time to buy?

Boeing Co. (NYSE:BA) shares are up 13.51% over the last two weeks. The company extended gains on Tuesday after Cowen analyst Cai Von Rumohr issued a buy rating and raised the price target to $290.00 from $240.00 per share.

The company’s stock is now up more than 168% since it bottomed at $90.06 per share on 18th March last year. BA stock still remains several levels below last year’s pre-pandemic highs of about $348.50.

Why BA could continue to ride the industry rally

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Cowen analyst Von Rumohr said that one of the reasons for issuing a buy rating was the expected rally in aerospace space-related stocks. Rumohr said that the resumption of air traffic would boost revenues of aerospace companies, and this should have a positive impact on the aircraft manufacturers as well. Rumohr said in a note to investors,

The first change is air traffic. Air travel is picking up after a moribund, pandemic-affected 2020— More people on planes is good news for all aerospace-related stocks

Another factor that the analyst sees boosting Boeing’s outlook is the expected replacement of old airplanes with newer models. As more aerospace companies look to shift to environmentally friendly airplanes, this will result in increased demand for the new models with low carbon emissions. This will boost Boeing’s top line in the long term.

Boeing is yet to return to profitability on a trailing 12-month basis. However, this is expected to change in the next 12 months, with the stock currently trading at a forward P/E ratio of 47.44.

Source – TradingView

Technical overview

Technically, Boeing shares appear to be on a bull-run since 19th May. The stock is yet to retest this year’s highs of $278.04 reached in March. This suggests that there is room left to run in the short term. In the long term, the stock is still several levels below last year’s highs. 

Investors looking to ride the current bull run can target short-term profits at around $266.66 or higher at $278.04. Key support levels can be found at $243.63 and $231.38, or lower at $219.72.

Bottom line: Boeing shares look set to continue the upward movement

In summary, although Boeing stock appears to be closer to hitting overbought levels of the 14-hour RSI. It is still far from this year’s highs, which means that there is a chance the current upward movement will continue. The long-term outlook is supported by high expectations on the resumption of air travel and shift to newer models of airplanes. This could be a great time to buy BA shares.

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