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Market Update

Big Decline in Boeing Shares a Buying Opportunity

Downgrade and Airbus contract win obscure improving cash flow.


What Happened?
Boeing (BA) shares dropped 9.4% on Monday on two pieces of news: An analyst downgraded the stock's investment rating and Airbus won an order for 10 jumbo A3XX aircraft. The order breaks the Boeing 747's 30-year monopoly on jumbo aircraft.

What It Means for Investors
We think this is a buying opportunity for long-term investors. Boeing trades at 9 times operating cash flow, well below its three-year average of 14, and management recently increased its free cash flow guidance for 2000 to more than $4 billion, up from $2.5 billion. The Airbus order has undermined some investors' confidence in the profitable 747, but the end of Boeing's monopoly is not a surprise. While contracts come and go and analysts upgrade and downgrade stocks, we think the real story is Boeing's dramatically improving free cash flow.

Richard Wilson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.