Boeing: A Contrarian Play Amid Regulatory Overhaul and Production Gains

Boeing (BA) has long been synonymous with aviation innovation, but recent years have seen the company grapple with regulatory scrutiny, production bottlenecks, and tragic accidents. Yet, for investors with a long-term horizon, these challenges may mask a compelling contrarian opportunity. Boeing's stock has languished amid these headwinds, but signs of stabilization in production, progress toward regulatory compliance, and a strategic pivot toward quality over speed suggest the worst may be behind it. Here's why Boeing could be a buy for patient investors.

Production Capacity: Stabilizing, but Not Stagnant

Boeing's 737 MAX production has been a focal point of its struggles. After years of delays and setbacks, the company finally reached its FAA-approved production rate of 38 aircraft per month in May 2025. This milestone, achieved after resolving quality issues highlighted by the Alaska Airlines door-plug incident in 2024, signals progress toward operational stability. However, Boeing faces a critical hurdle: certifying the 737 MAX 7 and MAX 10 variants, which remain grounded due to unresolved technical and regulatory issues. These models are pivotal to Boeing's competitiveness, as they directly challenge Airbus's A320neo family.

The backlog of 81 undelivered aircraft (including 26 MAX 7s and four MAX 10s) represents both a challenge and an opportunity. Once certified, these planes could quickly convert into revenue, easing cash flow pressures. Boeing aims to raise production further to 42 MAX per month by late 2025, but this depends on maintaining quality and securing FAA approval.

Regulatory Reforms: Pain Now, Trust Later

The Federal Aviation Administration's (FAA) stringent oversight has been a double-edged sword. While audits, inspections, and corrective action plans have slowed Boeing's recovery, they are also rebuilding trust in its safety culture. The FAA's reforms—including reduced delegation of authority, independent expert reviews, and whistleblower protections—are designed to prevent future crises.

Crucially, Boeing's employee-reported safety concerns via its "Speak Up" system rose 220% from 2023 to 2024, indicating improved transparency. This cultural shift, though costly in the short term, could pay dividends as regulators and customers regain confidence.

Financial Health: A Recovery in Slow Motion

Boeing's financials remain strained, but the path to stabilization is clearer. Deliveries in May 2025 hit 47 aircraft, up from depressed levels, with plans to convert its $12 billion undelivered inventory into revenue once certifications are secured. The company's goal of achieving positive cash flow by mid-2025 hinges on maintaining production rates and reducing penalties from delayed deliveries.

The recent Air India 787 crash is a stark reminder of residual risks, but Boeing has already begun addressing concerns raised by whistleblowers. A full investigation will be critical, but the Dreamliner's 20-year safety record (prior to this incident) and Boeing's financial reserves ($13.5 billion in cash as of Q1 2025) provide a buffer against potential liabilities.

Why Now? The Contrarian Case

Boeing's stock trades at a forward P/E of 12.5, below its five-year average of 15.3, reflecting investor pessimism. Yet, the company is positioned to capitalize on:
1. Certification Milestones: The MAX 7 and MAX 10 could gain approval by late 2025, unlocking $15 billion in deferred revenue.
2. Supply Chain Resilience: Boeing's machine-learning tools for quality control and partnerships with suppliers like Spirit AeroSystems are mitigating bottlenecks.
3. Market Share Recovery: With Airbus's own A320neo delays and Boeing's pricing power, the narrowbody segment remains a growth lever.

Risks and Investment Strategy

The risks are clear:
- Certification Delays: A slip in MAX variant approvals could prolong inventory costs.
- Air India Crash Fallout: A link to manufacturing flaws could ground the 787 fleet, derailing recovery.
- Geopolitical Risks: Trade tensions with China and labor strikes could disrupt deliveries.

For investors, Boeing's $90 stock price (as of June 2025) offers a margin of safety. A target price of $120 by 2026 assumes certification successes and a return to 50 MAX/month production. Buy on dips below $85, with a stop-loss below $70.

Conclusion: A Bumpy Ride to Recovery

Boeing is far from a sure bet, but its undervalued stock and strategic progress position it as a compelling contrarian play. Regulatory overhauls and production stabilization may finally put the company on a path to long-term profitability. While setbacks are possible, the long-term demand for commercial aircraft—projected to grow at 3.5% annually—supports Boeing's role as a leader. For investors willing to look past near-term noise, Boeing could offer a rewarding rebound.

Disclaimer: This analysis is for informational purposes only. Consult a financial advisor before making investment decisions.