Boeing's Turnaround: Can Operational Gains and Pent-Up Demand Drive a Stock Revaluation?

Boeing's journey from crisis to cautious optimism has been marked by operational overhauls, pent-up demand for commercial aircraft, and a gradual shift in market sentiment. After years of setbacks—from the 737 MAX grounding to supply chain disruptions—the company now stands at a critical inflection point. Recent analyst upgrades and production milestones suggest investors are beginning to price in Boeing's potential recovery. But can this momentum endure amid lingering risks?

Operational Turnaround: A Shift in Culture and Capacity

Boeing's transformation hinges on two pillars: cost discipline and production reliability. Under CEO Kelly Ortberg, the company has slashed defects by 30% since 2023, while employee safety report submissions have surged by 220%, signaling a cultural shift toward quality and transparency. These improvements are critical as Boeing aims to sustain a 38-per-month production rate for the 737 MAX—its highest since 2020—and gradually increase to 47/month by year-end, pending FAA approval.

The defense division's return to profitability in Q1 2025—after years of losses—adds further credibility. Cost controls on fixed-price contracts and progress on programs like the MQ-25 drone have stabilized revenue, contributing to a $1.2 billion operating income in 2024. While defense accounts for only 30% of Boeing's revenue, its stabilization reduces volatility and supports cash flow.

Pent-Up Demand: A Backlog Fueling Recovery

Boeing's 4,742-aircraft order backlog—including 1,200 undelivered MAX 10s and 332 MAX 7s—represents a multi-year revenue pipeline. Key catalysts include:
- Delivery Acceleration: May 2025 deliveries hit 47 aircraft, up 20% month-over-month, with 570+ deliveries expected in 2025. The resumption of Chinese deliveries in June 2025, following tariff resolutions, adds momentum.
- Major Deals: The Qatar Airways agreement in April 2025, which added 130 787 Dreamliners and 30 777Xs, injected $40 billion into Boeing's backlog. This highlights strong demand for widebody aircraft, which generate higher margins.
- Regulatory Milestones: FAA certification of the MAX 7 and MAX 10 variants—critical to fulfilling 1,500 orders—could occur by late 2025, though risks remain.

Each MAX delivery generates ~$100 million in revenue, directly addressing Boeing's $2.3 billion cash burn in Q1 2025. Converting this backlog into cash is now the single most important lever for recovery.

Valuation: Discounted Multiples vs. Industry Peers

Boeing's stock trades at a 6x EV/EBITDA multiple, nearly half of Airbus's 10x, despite similar order backlogs. This discount reflects lingering skepticism over Boeing's ability to execute. However, analysts argue that closing this gap could unlock 30–40% upside.

The Paris Air Show (June 2025) looms as a key catalyst. Historical data shows Boeing's stock rises an average of 47.78% in the 12 months following air shows, driven by new orders. Success in securing commitments for the 737 MAX 10 and 777X could reclassify Boeing as a “value” stock, lifting multiples.

Risks: A Delicate Balance

• Regulatory and Legal Hurdles: The FAA's conditional approval of higher production rates hinges on sustained quality. A June 2025 trial over MAX safety disclosures could result in penalties exceeding $2.5 billion, while the Air India 787 crash reignites scrutiny over Boeing's design processes.
• Supply Chain Fragility: A recent fire at a fastener supplier temporarily disrupted production, underscoring vulnerabilities. The 777X's delayed certification and Emirates' reliance on the aircraft add uncertainty.
• Competitive Pressures: Airbus delivered 5% more aircraft in 2024 than Boeing, capitalizing on production efficiency. Boeing's narrowbody dominance faces long-term erosion unless it accelerates MAX variants' certification.

Investment Thesis: A High-Reward, High-Risk Opportunity

The bullish case rests on Boeing's ability to:
1. Meet production targets, reducing its backlog and cash burn.
2. Secure orders at the Paris Air Show, narrowing its valuation gap with Airbus.
3. Resolve legal and regulatory issues without major penalties.

Analysts recommend buying Boeing ahead of the Paris Air Show, with a $220 price target (25% upside from June 2025 levels) and a $160 stop-loss to account for downside risks.

Conclusion: A Data-Driven Opportunity

Boeing's operational progress and pent-up demand create a compelling risk-reward scenario. While risks like litigation and supply chain disruptions are material, the $1 trillion order backlog and recent Qatar deal provide tangible catalysts. Investors should monitor FAA approvals, delivery data, and the Paris Air Show outcome. For aggressive investors, Boeing's discounted valuation and improving fundamentals make it a buy—if they can stomach the volatility.

Final recommendation: Consider a strategic position in Boeing, with a focus on near-term catalysts. Monitor closely for regulatory approvals and order momentum.