'We can no longer defend the shares': Boeing gets slapped with a trio of Wall Street downgrades as 737 Max scandal worsens

Boeing, 737 MaxReuters

  • In light of recent reports that Boeing employees may have misled regulators regarding the doomed 737 Max aircraft, a trio of Wall Street banks issued downgrades on the stock Monday.
  • Shares traded as much as 4% lower as the heightened scrutiny became the lastest development in a year-long scandal that began with two fatal crashes resulting in 346 deaths.
  • Here's why three Wall Street firms slashed their price targets for Boeing's shares on Monday.
  • Watch Boeing trade live.

Boeing's stock received a trio of downgrades from Wall Street firms Monday amid recent reports that the aircraft manufacturer may have misled regulators regarding the doomed 737 Max.

The company's shares plunged 4% on Friday after Reuters reported that the Federal Aviation Administration was reviewing internal messages between two employees that suggest they may have lied about a key safety feature on the aircraft model.

Shares extended those losses another 4% on Monday amid the flurry of Wall Street downgrades and intensifying scrutiny of the ongoing 737 Max crisis.

The banks warned that amid the recent developments it could take longer than expected for the model to return to service, resulting in rising costs and a damaging hit to the company's public image.

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Here's what three Wall Street firms that downgraded Boeing shares on Monday are saying about the aircraft manufacturer's worsening 737 Max scandal:

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Credit Suisse: "We can no longer defend the shares."

Credit Suisse: "We can no longer defend the shares."

Price target: Slashed to $323, from $416

Rating: Downgraded to "neutral," from "outperform"

Credit Suisse said the news could hurt the 737 Max's return to service due to a loss of trust with regulators, increased political risk, and waning public confidence.

"In our interpretation, the key takeaway is that BA seems to have known about MCAS's erroneous tendencies (in sim or otherwise) prior to certification," Credit Suisse analysts wrote in a note to clients Monday.

The firm added: "We can no longer defend the shares in light of the latest discoveries, discoveries which significantly increase the risk profile for investors."

UBS: "We see increasing risk that the FAA won't follow through with a certification flight in November."

UBS: "We see increasing risk that the FAA won't follow through with a certification flight in November."

Price target: Cut to $375, from $470

Rating: Downgraded to "neutral," from "buy"

According to UBS, the internal communications that were turned over to the FAA could motivate the agency to take a second look at other information provided by Boeing.

"We see increasing risk that the FAA won't follow through with a certification flight in November and lift the emergency grounding order in December," UBS wrote in a note to clients Monday.

The bank added: "Our confidence in what multiple the market will award to Boeing following the 737 Max return to service is no longer as optimistic."

Bank of America: "We see increased uncertainty related to the MAX return to service timeline."

Bank of America: "We see increased uncertainty related to the MAX return to service timeline."

Price target: Reduced to $370, from $400

Rating: Neutral

Bank of America Merrill Lynch pointed out that Boeing has only one engineer and one person with a science degree on its board, leaving a gap for oversight into Environmental, Social, and Governance concerns.

"We see increased uncertainty related to the MAX return to service timeline, Boeing's culture, brand and corporate governance," BAML analysts said in a note to clients Monday.

The firm continued: "Risk management, disclosure, and accountability of management and the board are key ESG investor concerns and could weigh on the stock in the wake of this setback."

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