GE Aerospace shares rose 1.5% in premarket trading Friday after Morgan Stanley initiated coverage with an Overweight rating and a $425 price target. The investment bank argued the market underestimates GE Aerospace's long-term free cash flow potential and pricing power in the aircraft engine aftermarket. Morgan Stanley's bull case projects shares could reach $615.

Aircraft engines represent mission-critical products with high barriers to entry, supporting sustained pricing power and above-trend growth. Morgan Stanley's $425 target is based on 2028 estimated free cash flow per share of $10.85 at a roughly 39x multiple. The bank forecasts free cash flow of $9.8 billion in 2027, $11 billion in 2028, $12.2 billion in 2029, and $13.5 billion in 2030 - estimates that are 8% to 14% above consensus.

GE Aerospace trades at about a 30% discount to leading commercial aerospace peers on a 2028 price-to-free-cash-flow basis. This valuation gap provides room for multiple expansion alongside higher earnings expectations. The bank projects net debt to EBITDA of 0.7x in 2027, providing flexibility for capital deployment. Morgan Stanley expects further upward revisions to earnings and cash flow estimates as consensus forecasts for 2027 and 2028 free cash flow continue trending higher.