Boeing Co (NYSE : BA) revealed plans to raise up to $25 billion in order to shore up the balance sheet amid ongoing machinist strikes and production issues.
Matthew Akers, an analyst at Wells Fargo, isn’t convinced that a capital increase will be enough to bring the share price of the company back up.
Akers rates Boeing’s stock as “sell” and warns that it will continue to decline until it reaches $109.
His price target suggests a possible 27% decline from here.
Boeing’s balance sheet is a mess
Boeing has also signed a credit agreement worth $10 billion with a group of banks.
“I don’t think it’s much of a difference for the entire balance sheet.” Matthew Akers said in an interview with CNBC on Tuesday that there is still a lot to do to pay off the remaining debt.
Akers does not read the news positively because the aerospace and defence giant already has over $50 billion of net debt, and the capital raise is expected to take the form of additional debt.
He added that the New York-listed company will also see higher costs in the coming years, regardless of what resolution it signs with the union.
BA is estimated to be losing $1.0 billion a month due to the machinists’ strike.
Boeing stock does not pay a dividend in order to attract income-oriented investors ahead of any potential economic slowdown.
Boeing faces the risk of cost overruns
Boeing will eventually fix production issues, and the stock price would then begin to rise – this has been the narrative up until now.
Wells Fargo analyst says that the debate has widened and the balance sheet will determine BA’s fate from now on.
He said on “The Exchange” that the multinational will need to invest in a brand new aircraft in the second half this decade, which has historically led to cost overruns and issues.
Richard Safran, a Seaport Global Securities analyst, remains bullish and sees the stock rising 40% to $209.
The Virginia-based behemoth wants to avoid a possible downgrade of its credit rating to “junk”.
BA announced recently that it will reduce its global headcount by 10% in order to cut costs.
It will lay off approximately 17,000 employees.
This post Boeing raises Capital, but Analysts warn it may not boost Stock Price may be modified as new updates unfold
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