Investing.com -- Citi analysts reaffirmed their Buy rating on Boeing (NYSE:BA), arguing that “the market is undervaluing Boeing’s long-term growth potential, pricing in less than 1% FCF growth in perpetuity.”
The bank’s analysts said in a note Thursday that they believe a higher growth rate is achievable, supported by strong trends in both commercial aerospace and defense.
“Our analysis suggests that a growth rate of 3% is achievable,” which “implies roughly 50% potential upside to Boeing’s current share price.”
Citi estimates that the commercial aerospace sector will see a “3.2% compound annual growth rate in airline fleet size over the next two decades.”
Boeing itself “forecasts a 3.2% CAGR for airline fleet growth globally from 2023 to 2043, representing a fleet expansion of approximately 23,000 aircraft.”
Additionally, the company’s “backlog of over 5,500 units, representing ~$435 billion in future revenue, further supports this positive outlook.”
On the defense side, Citi projects “a 3% CAGR base top-line growth in the defense market from FY25 to FY30.”
This expansion is expected to be fueled by “a focus on deterrence investments, suggesting 4-6% growth in the base investment account.”
The bank added that increased military spending among European NATO members is another factor, as these countries “rely heavily on US exports.”
Ultimately, Citi’s analysis suggests that Boeing’s current valuation does not fully reflect its long-term potential.
“This sub-1% implied FCF growth is calculated by considering the company’s current market cap, adding net debt projected to 2027, and using 2027 consensus FCF.”
Given the strength of its commercial and defense businesses, the firm sees “roughly 50% potential upside” in the stock.