The Boeing Company (BA): Our Calculation of Intrinsic Value

Key Takeaways

• DCF values Boeing at $85 per share.
• Current market price around $230, implying 63% overvaluation.
• High leverage: net debt $25B versus equity $67B.
• Recovery hinges on production ramp and margin improvement.
• Strong backlog and defense contracts provide long‑term tailwinds.

Summary

Each week we run a DCF model on Boeing, arriving at an intrinsic share price of roughly $85, far below the current market level near $230. The analysis uses a 10% discount rate, 2.5% terminal growth, and forecasts free cash flow rising to $8.5 billion by 2029, producing a $92.1 billion enterprise value. After subtracting about $25 billion of net debt, equity value translates to $85 per share, implying a 63% negative margin of safety. The market appears to be pricing in an optimistic recovery scenario.

Pulse Analysis

Boeing’s intrinsic value, as calculated by a standard discounted cash flow model, sits near $85 per share—far below the roughly $230 level at which the stock trades today. The model applies a 10 % discount rate, a 2.5 % terminal growth assumption, and projects free cash flow rising from $2 billion in 2025 to $8.5 billion by 2029, yielding a present‑value enterprise figure of $92.1 billion. After subtracting net debt of about $25 billion, the equity valuation translates to $85 per share, indicating a roughly 63 % negative margin of safety.

The disparity between market price and DCF output reflects lingering concerns over Boeing’s operational stability. Production hiccups on the 737 MAX and 787 platforms, compounded by supply‑chain bottlenecks, have eroded free‑cash‑flow consistency and forced the company to carry elevated leverage. While cash reserves of $29 billion soften the balance sheet, total debt remains near $54 billion, leaving a net debt burden of $25 billion. Investors therefore price in an optimistic recovery scenario, assuming the firm can swiftly normalize margins and sustain a steady cash‑generation trajectory.

Despite short‑term headwinds, Boeing retains strategic advantages that could underpin a long‑run upside. A robust commercial aircraft backlog, anchored by airlines’ need to replace aging narrow‑body fleets, promises sustained demand once production ramps up. Additionally, the defense and space segments contribute diversified revenue streams less sensitive to cyclical airline cycles. Service and aftermarket offerings further enhance cash‑flow visibility. For capital‑allocation decisions, the stock currently resembles a turnaround play rather than a stable growth compounder; meaningful upside will likely require execution that exceeds the conservative assumptions embedded in the DCF.