The shares of airplane maker Boeing slightly recovered on Wednesday following a sharp decline the day before, which was caused by the downgrade of the company’s stock from investment bank Wells Fargo.
In a note shared with clients on Tuesday, Wells Fargo’s analyst Matthew Akers said Boeing will need to address its $45 billion in net debt before developing its new aircraft. The process is expected to “consume its cash flow through 2030” and delay the targeted annual free cash flow of $10 billion by two years.
Back in 2022, Boeing said it aims to achieve an annual free cash flow target of $10 billion by 2025 or 2026.
Akers adds that there is also an increased possibility of Boeing offering additional shares, which would dilute the holdings of existing shareholders.
“A substantial further equity raise is needed in the coming years, further diluting shareholders,” Akers added.
Akers has now downgraded Boeing’s stock from equal-weight to “overweight” and placed a new price target of $119 per share.
Boeing’s shares dropped by more than 7% on Tuesday after the downgrade and closed at $161.02, being 35% down year-to-date. The stock would go on to slightly recover on Monday to trade around $165.09 per share.