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According to hedge fund manager Doug Kass, Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) is primed to pull off its biggest acquisition yet in 2025 - acquiring Boeing (BA), the aerospace giant and Dow Jones ($DOWI) heavyweight. If this prediction materializes, it could mark both a historic moment for Berkshire and another bold stroke in Buffett’s already legendary career.
Adding fuel to the speculation, Kass suggests that to fund this monumental move, Berkshire could eliminate its entire stake in Apple (AAPL) by mid-year, freeing up billions. This shift would be classic Buffett: trading the high-flying tech sector for a cornerstone of American industry.
With Boeing recovering from its pandemic lows and poised for growth, this might be the perfect time for a transformative buy, signaling Buffett’s renewed belief in the country’s industrial backbone.
About Boeing Stock
Boeing (BA) has soared to become a titan in aerospace and defense. Headquartered in Arlington, Virginia, its aircraft rule the skies with legendary jets like the 737, 747, 777, and the 787 Dreamliner.
Serving everyone from commercial airlines to military powerhouses like the U.S. Department of Defense and NASA, Boeing’s influence stretches across over 150 countries. From next-gen jetliners to high-tech satellites, Boeing remains a cornerstone of aviation, with a $105.6 billion market cap.
Shares of the aerospace giant nosedived 30.5% over the past 52 weeks, hitting a 52-week low of $137.03 in mid-November. But December brought a glimmer of hope, with a 13.1% rally lifting spirits. The surge was driven by positive news around boosted 737 MAX production, expectations of a profitable defense business, and optimism surrounding the 777X. What seemed like a tough year for Boeing now looks like a potential rebound.
BA is looking like a bargain right now. At just 1.43 times forward sales, it is trading at a discount not only to its aerospace peers but also compared to its own historical valuations.
Boeing Misses Q3 Estimates
On Oct. 23, Boeing revealed its third-quarter earnings results, with revenues of $17.8 billion, down 1% year-over-year, primarily due to lower widebody deliveries and its union work stoppage. The core loss ballooned by 220.2%, hitting $10.44 per share, missing estimates, mainly due to the strike and program charges.
On a brighter note, plane deliveries rose 10% to 116, and the backlog grew to a massive $511 billion, with over 5,400 commercial planes in the pipeline. Despite the challenges, the massive backlog keeps Boeing’s potential alive.
Boeing's cash flow took a sharp hit this quarter. The aerospace giant ended with $10.5 billion in cash and marketable securities, but its long-term debt climbed to $57.7 billion. Even more striking, free cash outflow reached $10.2 billion for the first nine months of the year, a far cry from last year’s $1.5 billion inflow. It is a tough pill to swallow, but Boeing’s still sitting on a hefty pile of cash, keeping the engine running for a comeback.
Boeing’s management sees Q4 as a cash drain, driven by the timing of the workforce return, production ramp-up, and inventory unwind. But there’s optimism for fiscal 2025, with significant cash flow improvement expected, especially in the latter half of the year.
The management is confident that by the end of 2025, Boeing will hit its stride with stable production rates. Despite being challenging, smart moves are in play: reducing expenses across the supply chain, aligning the workforce to match financial realities, and narrowing the focus for stronger future momentum.
Analysts expect Boeing’s loss per share to hit $16.41 in fiscal 2024, with a sharp 92.1% improvement to a loss of $1.29 per share in fiscal 2025 as the recovery gains momentum.
Turbulence in Boeing’s Recovery
Boeing’s path to recovery is littered with obstacles. The company has an imposing debt load of $57.65 billion, a stark reminder of the financial turbulence endured in recent years. Operational inefficiencies, quality control issues and regulatory scrutiny, have frayed Boeing’s credibility. South Korea’s investigation into the fatal crash of a 737-800 has further stoked concerns about safety protocols, with early probes pointing to a potential bird strike and anomalous landing gear failures.
The specter of legal entanglements looms large, with ongoing negotiations to resolve a criminal case tied to the catastrophic 737 MAX crashes. Adding to the complexity, leadership transitions with a new CEO must foster a cultural overhaul, ensuring alignment with regulatory expectations and customer trust.
What Do Analysts Expect for Boeing Stock?
Despite the challenges, yesterday, Barclays upgraded BA stock to “Overweight," boosting the price target from $190 to $210, signaling a newfound optimism about the aerospace giant’s future. The firm foresees a renaissance in production cadence and delivery schedules, projecting sustained momentum into fiscal 2025.
While the valuation metrics are not overwhelmingly compelling, the promise of cash flow gains and operational resurgence underpins this bullish shift. FCF remains elusive, but Barclays strikes a note of cautious optimism, suggesting breakeven could finally be within reach by 2025. For investors eyeing long-term gains, Boeing stands ready to rise from its setbacks, steadily reclaiming its position as a dominant force in the skies.
Despite a tough year and ongoing hurdles, analysts are still relatively upbeat about Boeing. BA stock has a consensus “Moderate Buy” rating. Among the 25 analysts covering the stock, 15 are highly bullish with a “Strong Buy,” one advises a “Moderate Buy,” eight suggest a “Hold,” and one has a “Strong Sell.”
The mean price target for BA is $189.21, indicating upside potential of 10.8% from current levels. The Street-high target price of $250 implies that the stock could rally as much as 46.4%.
