Shares of Boeing (BA) are slipping on Thursday after Berenberg analyst Andrew Gollan downgraded the stock to Sell, suggesting investors "lock in any gains" ahead of what should be weak second-quarter results next month. Given Boeing's ongoing challenges, the 737 MAX outlook being under more pressure, and its high leverage, Gollan sees the shares "pricing in too much optimism."

'TOO MUCH OPTIMISM': Berenberg analyst Andrew Gollan downgraded Boeing to Sell from Hold with a $150 price target, suggesting investors "lock in any gains" ahead of what should be weak second-quarter results next month. Given Boeing's ongoing challenges, the 737 MAX outlook being under more pressure, and its high leverage, Gollan sees the shares "pricing in too much optimism."

The market's recent exuberance for re-opening economies and an early resumption in air traffic has driven a strong rebound in aerospace shares with Boeing up 30% in a month, he noted. However, the analyst argues that the demand outlook has not improved and has even deteriorated since first-quarter results, as airlines face prolonged business uncertainty and financial stress and COVID-19 remains prevalent across the globe.

Additionally, Gollan pointed out that despite indications that re-certification of the MAX is close, Boeing signaled a weaker short-term outlook with its instruction to Spirit AeroSystems (SPR), a key supplier, to reduce delivery plans just weeks after the production re-start. For Boeing, balancing MAX production and deliveries is complex due to lower and uncertain demand for new aircraft, and hampered by an inventory overhang of about 450 undelivered MAXs, he contended. He cut his 2020, 2021, and 2022 delivery assumptions to 60, 392, and 480 aircraft, which lead to earnings per share estimate reductions of 10%, 15%, and 13%, respectively, for those years. While the analyst believes the MAX's potential is diminished, he still "firmly" believes it will feature in the market as the airline industry drags itself out of this crisis.