The FAA on Wednesday grounded all Boeing 737 Max jets in the U.S., citing links between two fatal crashes. The turnaround came after dozens of countries around the world grounded the planes, tanking the stock nearly 11 percent this week, on pace to post its biggest weekly decline since 2008.
Bank of America kept its buy rating and $480 price-target on Boeing as the bank believes the investigation would have a “definitive timeline” as the recovery of the black boxes is already underway. This would significantly reduce the uncertainty around Boeing and the 737 Max model, the bank said. The two black boxes from the Boeing 737 MAX 8 that crashed on March 10 in Ethiopia were being taken to Paris for investigation.
“We would expect Boeing to continue to produce the 737 at the current rate of 52 per month in order to minimize disruption in the supply chain. Boeing may have to carry inventory in its balance sheet of about $5.5bn per quarter. We would expect working capital to improve as the aircraft begins delivery again,” Epstein said.
The bank predicts that the rentals Boeing would have to pay for alternative airlines would cost the company $500 million or $0.88 per share in the first quarter.
WATCH: Airlines should recover quickly from 737 Max grounding
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