Boeing Stock Slumps Again; Time to Buy or Throw in the Towel?

Boeing (NYSE: BA) stock delivered another double-digit one-day drop that investors have, unfortunately, gotten used to over the past decade. In a nutshell, management told investors probably the last two things they would have wanted to hear. Production targets on the narrow-body 737 MAX have been pushed out, as have free cash flow (FCF) projections.

As a result, it's no surprise that a slew of Wall Street analysts lowered their price targets on the stock. Still, what should investors do now?

Boeing disappoints investors, again.

I won't sugarcoat matters; this was a disappointing update from Boeing. Moreover, the company faces a significant risk event in 2027 related to certification of the wide-body 777X. Still, on balance, I think there's a good case for buying the stock, provided you can handle potential volatility.

But first let's get the bad news out of the way:

• Boeing's 737 MAX production rate projections imply as much as a year's delay in ramping up production on Boeing's key aircraft.
• Management's FCF projections of $2 billion in 2026, $3 billion in 2027, $6 billion in 2028, and $10 billion in 2029 are significantly below Wall Street's pre-earnings Visible Alpha consensus expectations of $5.3 billion in 2027,$9.5 billion in 2028, and $12.4 billion in 2029.
• Management continues to expect certification on the 777X by the middle of 2027, followed by its first delivery later in the year.

737 MAX ramp difficulties

Dealing with these points in turn, management's plan at the start of the year was to ramp up from a rate of 42 737 MAX units per month to 47 per month in the summer. Given that the company's stated aim was to increase the rate by 5 a month, no earlier than 6 months apart, it was reasonable for optimistic investors to tentatively pencil in a rate of 52 a month at the end of 2026. In other words, up to a year's delay in what investors might have had 737 MAX assumptions penciled in at.

Given the importance of increasing delivery volumes in improving Boeing's profit margins (spreading its fixed costs across more units), it's hardly surprising to see such a disappointing FCF guidance update. It's particularly disappointing as the company recently received good news on the certification of the largest 737 MAX variant.

Image source: Boeing.

Free cash flow disappoints, and the 777X

The relatively slow ramp-up of the 737 MAX is one issue for FCF, and the lack of certification and deliveries for the 777X is another. Boeing needs to start delivering the 777X because any delays mean more cash tied up in undelivered aircraft.

As such, the certification and first delivery of the 777X are major watch items for 2027. Any delay of either will worsen Boeing's cash flow outlook. In fact, management expects significant cash use on the 777X in 2027 before it finally turns cash flow positive in 2029.

What you have to believe to buy Boeing stock

Despite all the bad news, there's still a strong case for buying the stock. Let's say Boeing hits its $10 billion FCF target in 2029 and trades at 20 times FCF. That would roughly equate to a share price of $252, implying an annual return of 14.4% to 2029.

To believe in management's forecasts, you have to believe the 777X certification and delivery will take place next year, and management's forecast for the 737X production ramp. However, as Melius Research analyst Scott Mikus noted on the earnings call, management said 2029 production rates are expected to be in the "mid to high 50s" for the 737 MAX and 12 per month for the 787 Dreamliner. Still, management also expects to hit 52 a month on the 737 MAX in the second half of 2027 and hit 10 a month "on the 787 by the end of this year."

Frankly, the jump in production implied between 2027 and 2029 looks conservative.

Image source: Gettty Images.

Is Boeing stock a buy?

The stock appeared a good value going into the results. As disappointing as the update was, it looks like the reset expectations and the post-earnings dip are setting the stock up for good returns if management hits its production targets. Recall that beating production and delivery targets likely means beating FCF targets as well, and with a company backlog of $745 billion, Boeing has an opportunity to deliver for investors.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool has a disclosure policy.