UBS raises Boeing price target, says shares could rise as much as 50 percent

Key Points
  • "We believe Boeing shares carry the best upside in the sector," analyst Myles Walton says.
  • UBS raises its 12-month price target to $515 a share. The stock closed Wednesday at $338.36.
A Boeing 737 Max gives a display during the opening day of the Farnborough International Airshow in Hampshire.
Andrew Matthews | PA Images | Getty Images

Analysts at Swiss bank UBS have raised their 12-month price target for Boeing shares to $515, more than 50 percent higher than their current level.

The bank also raised the airline manufacturer to a "buy" rating from its previous "neutral" stance.

"We believe Boeing shares carry the best upside in the sector," analyst Myles Walton said in a note Thursday after assuming the bank's coverage of the stock.

"Much of the cash growth and margin expansion story (is) set to be unlocked with our $31 per share in free cashflow estimate for 2020, 15 ahead of consensus," the note added.

Following the note's release to market, shares of Boeing rose nearly 2 percent in pre-market trading to $338.

UBS said short-term concerns such as supplier issues that have slowed aircraft deliveries and potential trade tariff headwinds might result in pullbacks, but investors should see those as "attractive buying opportunities."

UBS said the primary driver for the crucial commercial plane segment will remain air traffic growth, which is currently running hotter that the 5 percent long-term trend.

The bank also noted that while 60 percent of Boeing's earnings and 70 percent of its cash comes from the sale of commercial airplanes, many investors were overlooking the potential upside to aftermarket service contracts.

Boeing is targeting $50 billion per annum in services contracts by 2025. UBS said while that is unlikely, evidence showed that services could be worth $35 to $40 billion to the company by the mid-2020s.

The UBS price target of $515 for Boeing shares puts it at the highest of 22 bank price targets published by Reuters. The mean figure among analysts is $410.