Boeing stock falls as Morgan Stanley downgrades on valuation

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By Senad Karaahmetovic 

Shares of Boeing (NYSE:BA) are down over 2.5% in pre-market Tuesday after Morgan Stanley analysts downgraded to Equal Weight from Overweight.

They believe Boeing shares are approaching "fair value" following the recent outperformance. Boeing stock is up about 70% since early October and it closed at $208.57 yesterday.

"We see a balanced risk reward as the majority of the near- and medium-term positive catalysts for the stock have been realized. Going forward, we expect Boeing to trade on execution of its 2025/2026 aircraft production rate targets and free cash flow generation. Despite the strong demand for aircraft, we see the supply chain as a bottleneck for further production/delivery increases, which is the key milestone for cash generation," the analysts wrote in a client note.

The "catalyst rich periods" are now behind Boeing, hence they see limited upside from current levels. Morgan Stanley hiked the price target to $220 per share from the prior $213, reflecting a higher multiple.

"We see the potential for the stock to trade > 15x P/FCF if execution across businesses improves, supply chain constraints ease earlier than expected, and new incremental aircraft orders continue," the analysts added.