Bank of America Merrill Lynch has cut its outlook on Boeing, saying the airline manufacturer's recent troubles with its 737 are worse than expected. Boeing shares tumbled 4% on the move.
Two crashes of the Boeing 737 Max 8 forced the company to cut its production. BofA now estimates delays with the 737 will last six to nine months, longer than the three- to six-month delay originally forecast.
BofA cut its rating on the Dow component from buy to neutral and lowered its price objective to $420 from $480.
The company's issues stem from crashes of Ethiopian Airlines Flight 302 and Lion Air Flight 610 over the past six months. Questions have been raised about the safety of the Max 8 and 9 jets as well as the general oversight being provided by the Federal Aviation Administration.
"The reputational loss from these events could erode long-term market share and pricing power of the 737 MAX," BofA analyst Ronald Epstein said in a note to clients.
Though still up 21.5 percent year to date, Boeing's shares have fallen nearly 9 percent in the past month.
In addition to the initial 737 Max delays, BofA estimates it will take Boeing through 2021 to catch up to delivery orders for its aircraft.
"A six month delay also means lower margins due to penalties owed to customers, weaker negotiating position with airlines as airlines consider cancellations, and operational inefficiencies from the production disruption," Epstein wrote.
Boeing is reducing its production of the 737 Max to 42 per month, down 10 from its original target.
Correction: This story was revised to correct that BofA's new rating of Boeing stock is neutral.