The impact of the coronavirus on the airline industry has created a much gloomier outlook for already-struggling Boeing Co (NYSE: BA), according to Canaccord Genuity.
The Boeing Analyst
Ken Herbert maintained a Hold rating on Boeing and reduced the price target from $340 to $225.
The Boeing Thesis
Although Wednesday’s 18% decline in Boeing shares represents an overreaction, the company’s outlook has materially worsened over the past few weeks, Herbert said in the note. (See his track record here.)
Boeing announced negative net orders for February, with 18 new orders and 46 cancellations, the analyst said.
Moreover, news of the aircraft manufacturer accessing a line of credit worth around $14 billion fueled concerns over the company facing a cash crunch, he said.
While the virus situation in China seems to be stabilizing and cargo traffic into the country has mostly recovered to pre-crisis levels, other markets like North America and Europe are still in the early stages of the COVID-19 impact, Herbert said.
Although Boeing is unlikely to be facing a liquidity crisis, there is significant cash pressure on the company, the analyst said.
"Beyond near-term risks to airline profits and BA’s ability to deliver aircraft, the coronavirus has raised questions about the viability of the commercial aerospace cycle."
BA Price Action
The stock was down 12.16% at $166.09 at the time of publication Thursday.