Hold Boeing Stock? Here's the 1 Thing Long-Term Investors Need to Focus On.

Core Viewpoint - Boeing's long-term future hinges on developing the next generation of narrowbody airplanes to replace the 737 MAX, as acknowledged by CEO Kelly Ortberg [1] Group 1: Investment Cycle - Developing a new aircraft requires years and significant investment, with former CEO Dave Calhoun estimating a $50 billion investment needed for the next generation of narrowbody aircraft [2] - The typical pattern in long-cycle industries involves heavy investment followed by increasing cash generation as deliveries ramp up, which can then fund future aircraft development [3] Group 2: Financial Position - Boeing's cash flow generation from the 737 MAX has been adversely affected by its grounding and the pandemic, leading to a challenging financial situation [4] - At the end of Q1, Boeing had$53.6 billion in consolidated debt, $23.7 billion in cash and marketable securities, resulting in a net debt of$29.9 billion [5] Group 3: Free Cash Flow (FCF) Outlook - Analysts project FCF to improve from an outflow of $3.8 billion in 2025 to a generation of$8.8 billion in 2027, with net debt potentially reducing to $18.8 billion [8] - If Boeing can achieve FCF above$10 billion annually, it could pay off its debt by 2029 and support investment in a new $50 billion aircraft [8] Group 4: Stock Valuation - Despite early signs of improvement under Ortberg, Boeing faces significant challenges, including tariff uncertainties and the need to improve delivery rates and quality [9] - The stock is not considered notably undervalued, as achieving$10 billion in FCF by 2030 may be hindered by the funding requirements for the new narrowbody aircraft [11] - With a current market cap of $134 billion, Boeing would need$6.7 billion in FCF through the cycle to justify a 20 times FCF multiple, which is a challenging assumption given the upcoming investments [12]