Morgan Stanley sees more downside risk for Boeing stock

Investing.com -- Morgan Stanley analysts said in a note Friday that Boeing (NYSE:BA)'s stock faces heightened downside risk following a labor strike vote by the International Association of Machinists (IAM) Local 751.

The union rejected Boeing's proposed labor contract, continuing an ongoing work stoppage that threatens to complicate the company's operations and financial position.

"The IAM 751 Union voted against the new labor contract," Morgan Stanley (NYSE:MS) noted, adding, "We expect Boeing's stock to react negatively."

They believe investor sentiment may begin to sour, with concerns rising over potential cash outflows, delays in supply chain normalization, and a possible capital raise.

Although the analysts reiterate their price target of $170 and maintain an Equal-weight rating on the stock, they acknowledge that the bear case could push the stock as low as $110 if the strike continues through the end of the year.

Since the strike announcement, the stock has hovered around a floor of $150, a threshold Morgan Stanley warns could be breached with prolonged labor disruptions.

Morgan Stanley also highlights three significant risks tied to Boeing's current challenges: Labor resolution uncertainty, a potential capital raise, and supply chain disruptions.

"The extended strike likely increases the potential for increased headwinds for the supply chain," the bank warns, emphasizing how delayed production schedules could further pressure the stock.

Investor optimism around Boeing's recovery could also fade, Morgan Stanley suggests, as "the heightened uncertainty of cash outflows" complicates the timeline for a return to normalized free cash flow generation.

While Morgan Stanley is not downgrading Boeing's stock at this time, the analysts stress that the labor strike introduces near-term risks that investors will need to monitor closely.