Two months ago, on May 17, the U.S. government said it would investigate a claim by Boeing Co. (BA) that Canada illegally subsidized sales of its C-Series aircraft to Delta Air Lines Inc (DAL) .  Immediately, Canada warned that it could cancel its planned purchase of 18 Super Hornet fighter jets.

Investors dumped Boeing stock. Shares closed May 16 at $182.70. The next day they traded as low as $175.40, down 4%.

That turned out to be a major buying opportunity because Boeing shares have been on a tear ever since.

While the Dow Jones Industrial Average average has gained 3.1% since the May 16 close, Boeing shares have gained 14%. Year to date, the Dow has risen 9.49% while shares in Boeing, the No. 1 performer on the Dow, have jumped 34%.

On Friday, JPMorgan analyst Seth Seifman upgraded shares to overweight from neutral. He has a price target of $240.

Boeing on Tuesday was down 0.3% to $208.30.

"The stock has outperformed {the Dow} by 25% YTD and there is only 15% upside to our Dec 2018 price target of $240, yet we still believe the upgrade is warranted in a market where outsize upside is elusive," he wrote.

Seifman listed five reasons for the upgrade.

"First, BA is among the stocks best positioned to benefit from positive aero fundamentals," he said. "Second, BA is consciously trying to shape the industry to capture more value for itself, which could mean strong relative performance and potential upside to estimates.

"Third, our {free cash flow} and {earnings per share} estimates are moderately above consensus. Fourth, management has been proactive in addressing challenges the past 18 months. And finally, while sentiment has improved, BA has received very few upgrades the past year and holder data shows few active investors establishing or adding to large positions."

Seifman said his $240 price target values Boeing at 20 times his 2019 earnings per share estimate of $12.30, compared with consensus is $11.55. However, he said, Boeing currently trades at 20 times its 2018 consensus. "Investor fears of a downturn and the impact on valuation are the biggest risk," he said.

The assumptions, Seifman said,  are that airline traffic growth remains solid, although closer to the long-term annual average of 5% than to the recent post-recession 8%; that the market can absorb increased narrowbody production, with Boeing raising 737 production to 57 a month in 2019; and that widebody demand remains at current levels.

Broader risks could include recession, a decline in global access to capital, oil price variations and a slowdown in China, which accounts for 25% of all Boeing deliveries, he said.

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CFRA analyst Jim Corridore has a buy rating on Boeing and a $210 price target.

"We see price appreciation over the next several years as commercial aircraft demand remains strong, 787 and 737 production ramps, cash returns to shareholders rise via increased stock repurchases and dividends, pension headwinds diminish and additional 787 and 777X orders drive a reacceleration in Boeing's widebody aircraft orders," the analyst said.

"A drag from defense" could pose a risk, Corridore said, but "the operation's size relative to the commercial business and the recent election of Donald Trump argue for increases in defense in coming years."

One recent event that has helped Boeing shares was the launch of the 737 MAX 10 at the Paris Air Show. On June 20, the aircraft got a boost when United Continental Holdings Inc. (UAL) said it would convert 100 of its existing MAX orders to MAX 10 orders.

During the first week of the Paris Air Show, June 19 through June 23, Boeing shares opened at $197.88 and closed at $202.23.

In 2013, Boeing shares hit $100 for the first time. In 2016, Boeing celebrated its 100th birthday. On June 20, Boeing shares reached $200 for the first time.

"The {MAX 10} launch is credit positive because it adds an aircraft to Boeings MAX Family that can compete with the rival Airbus A321 neo," wrote Moody's Investor Service analyst Jonathan Root in a June 22 report.

"Although we believe most MAX 10 orders will cannibalize demand for the MAX 9, adding the larger aircraft is important for Boeing because it will enhance the appeal of its narrowbody lineup among operators with mixed fleets of Airbus and Boeing aircraft and among existing Boeing operators that might have otherwise ordered the A321neo," Root said.

Moody's estimated the value of the first 250 MAX 10s at $15 billion assuming a 50% discount to the list price. "Launch customers typically receive even steeper discounts," the firm said.

As for the Bombardier C-Series order, Delta CEO Ed Bastian said, "We do not intend to slow down any of the deliveries that we have planned for the C Series.

"We'll be taking our first this coming spring and we look forward to taking that aircraft," Bastian said Thursday during the carrier's second-quarter earnings call.

Bombardier got a major boost for the slow-selling C-Series in April 2016, when Delta placed a firm order for 75 aircraft, with an option for 50 more.

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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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