Boeing (NYSE: BA) is one of two major commercial airplane makers in the world, which has helped keep Boeing stock in the spotlight for many years.
Yes, there are smaller firms that build smaller planes, but when it comes to most of the planes that fill the world’s skies, a lot of those come from BA.
Plus, Boeing has a significant aerospace division that includes vital U.S. military and homeland security contracts, beyond its commercial airline business.
The bottom line is, Boeing stock is woven into the U.S. economy and to disentangle it, would take something far more significant than the recent tragedies that we saw in Indonesia and Ethiopia.
But that isn’t to say that BA stock isn’t done correcting. There are going to be Congressional hearings and both BA and its long-time C-suite executive who is now the acting Secretary of Defense Patrick Shanahan will have to manage that.
For BA, it may mean different protocols in its relationship with the Federal Aviation Administration. The two have become very cozy over the years and lax oversight from the FAA meant that BA seemed to be operating as its own de facto supervisor.
This will certainly change.
As for Shanahan, who had spent 30 years at BA, he’ll be answering to accusations that he was less than objective when it came to certain military contracts between his former employer and competing firms. This won’t come back to hurt BA stock, but Shanahan may not get to transition from acting secretary to secretary once this is all over. And BA won’t have a former big wig running the Department of Defense.
As for the planes and the orders, it’s unlikely that BA will lose much business since buying planes isn’t like buying cars. They’re not sitting somewhere waiting for someone to buy them.
Bottom Line on Boeing Stock
Negotiating these deals — especially the big ones — takes time. And delivery takes time. Scrapping a deal when you have already planned on implementing the new planes and cutting another deal with another company to replace them is a very big deal.
Plus, at this point, it seems this was a software problem that was fixed at the factory but was only offered as an expensive option, rather than made a standard safety upgrade. This is what happens when you nickel and dime safety features in airliners.
But the new MAX versions of the 737 will continue to roll off the line and be a huge revenue generator moving forward. Executives at BA and in the federal government will pay a price, but the company will move past this.
And that means this big price drop in Boeing stock is a contrarian dream.
That’s not to say Boeing stock has bottomed. That may not be the case yet, but the upside is far bigger than its downside at this point.
My Portfolio Grader has BA stock rated a B right now, and that makes sense. You may want to wait for this whole current mess to pan out, or you can move in and take some of the turbulence. But long-term, Boeing is going … up.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
