Boeing stock price lost more than half of its value in the past two months as coronavirus related shutdowns have slashed demand for air travel, forcing the majority of the airlines to ground the aircraft and slash future investments.
Boeing is among the largest plane makers around the world; it is expecting a substantial decline in new orders along with the threat of cancellation of existing orders.
The lack of cash resources and a high cash burn rate due to charges related to 737 Max tragedy has added to the Boeing shares selloff. The S&P has recently dropped its credit ratings to BBB- from BBB.
However, the company’s strategy of raising $25bn by offering bonds helped in addressing cash related challenges. The move would provide sufficient liquidity to the company to run its operations and to avoid going into government aid.
“As a result of the response, and pending the closure of this transaction expected Monday, May 4, we do not plan to seek additional funding through the capital markets or the U.S. government options at this time,”Boeing
Boeing stock reacted to the big cash inflow. Its share price continues to trade in a $130 range after bottoming below the $100 level. Boeing stock is still down 60% since the beginning of this year while Goldman believes the dip is presenting a buying opportunity.
Goldman provided a price target of $209 with a buy rating as its analyst Noah Poponak says the demand for air travel is likely to recover in the coming months, and Boeing is in a position to generate strong free cash flows once the industry recovers.
“The Q1 results revealed multiple steps toward the first phase of stabilization, including degree of cash burn and options for additional liquidity, the 737 MAX timeline to service, and the 787 production rate.”