Goldman makes bold upgrade of Boeing shares, saying it has enough cash and air travel will return

Published Sun, Mar 22 20206:41 PM EDT

(This story is for CNBC Pro subscribers only.) With Boeing tumbling 80% from its record high amid the coronavirus crisis, Goldman Sachs said "substantial fear" has been priced in and investors can bet on the U.S. planemaker to recover on the back of its strong balance sheet and a rebound in air travel demand. In a bold call on Sunday, Goldman upgraded shares of Boeing to buy from neutral, while cutting its 12-month price target to $173 from $256 to reflect the recent sell-off. The new target represents a 82% gain from Friday's close of $95.01. "We think Boeing will remain a going concern," Goldman analyst Noah Poponak said in a note on Sunday. "We think travel by flight will be as popular as ever once COVID-19 is resolved. We therefore think shares of BA should be procured at the current price ... Substantial fear priced in, while long-term secular growth intact." Boeing's stock plunged 70% in 2020 so far, making it the worst performing S & P 500 stock over a $50 billion in market capitalization, Goldman noted. The bank believes Boeing has "adequate liquidity" to cover a deeply negative free cash flow year in 2020, including no deliveries of its 737 Max jetliner after fatal crashes. Boeing is pursuing $60 billion in U.S. government aid to offset the negative coronavirus impact for the aerospace industry, including loan guarantees. "Federal assistance to both the airlines and separately to the aerospace manufacturing sector is possible. A MAX certification flight could occur near-term which would calm liquidity fears," Poponak said. The analyst also said commercial aerospace remains a long-term secular growth market, and investment appetite will return after the coronavirus crisis is over. "We envision a time in the medium term, where investor sentiment is once again positive in commercial aerospace," Poponak said. "Air travel adds substantial value to modern society, yet also remains underpenetrated in most economies compared to the US and Europe. Prior unexpected demand shocks have been followed by quick recoveries in travel." —CNBC's Michael Bloom contributed reporting.

A pilot waves as a Boeing 777X airplane taxis during its first test flight from the company's plant in Everett, Washington, U.S. January 25, 2020.

Terray Sylvester | Reuters

(This story is for CNBC Pro subscribers only.)

With Boeing tumbling 80% from its record high amid the coronavirus crisis, Goldman Sachs said "substantial fear" has been priced in and investors can bet on the U.S. planemaker to recover on the back of its strong balance sheet and a rebound in air travel demand.