If the trend is your friend, then Boeing (NYSE:BA) stock is no friend of mine. Each successive price-support level keeps getting penetrated. Everybody wants a low price, but sometimes lower prices just lead to even lower prices.
Not only do the technicals look bad, but Boeing stockholders are also battling against the Federal Aviation Administration (FAA). That’s not a battle I’d like to fight. Cautious investors have good reasons to just avoid Boeing at all costs.
Rejection Can Be Painful
Boeing shares are falling, and you can’t just blame the overarching bearish sentiment of the market. Sure, the Dow Jones Industrial Average has been under pressure. And it’s true that Boeing is part of that index.
However, it’s wrong to simply blame the macro conditions for Boeing’s problems. There’s no shortage of reasons to avoid this company in particular. The latest reason just hit the headlines, in fact.
As hinted earlier, there’s a problem with the FAA. You probably have already heard about the issues with the grounded Boeing 737 MAX jetliner. That has been in the news for a while now. There have been issues with wiring bundles that could potentially lead to a short circuit. Worse yet, if pilots failed to react quickly enough, a crash could ensue.
Boeing contended that those wiring bundles did, in fact, meet the required safety standards. The company also claimed that it should be up to Boeing to decide on how to proceed. However, the FAA does not agree.
Evidently Boeing just wanted to leave those wiring bundles in place. The FAA rejected this proposal. Fighting against regulators is a tough battle to win. The FAA’s rejection could potentially delay the 737 MAX’s return to service.
Things Could Get Much Worse for Boeing
It seems like all of the headlines surrounding Boeing are negative. Just to give you another example, there’s an interim report that recently came out of Ethiopia. You might recall last year’s Ethiopian Airlines flight of a Boeing 737 MAX jet in which 157 people perished. The interim report states that the sensor’s readings on that plane were faulty.
That’s terrible publicity for Boeing. There’s one piece of negative news after another reminding the public of the 737 MAX disaster. And this doesn’t even factor in the impact of the coronavirus from China yet.
Boeing had already shed approximately $60 billion in market value prior to the escalation of coronavirus fears. The COVID-19 concerns didn’t really come into the public consciousness until this year. Boeing stock had already been falling in 2019, even while the major market indexes were trekking higher.
There were two fatal MAX plane crashes in just five months. By the middle of March last year, regulators had to step in and ground the MAX jets. Throughout 2019, Boeing repeatedly pushed back the expected re-certification for the MAX jets. Investors, in turn, punished the share price.
Don’t be surprised if they keep on punishing it. Regulatory agencies are not known for acting quickly. And the coronavirus is only complicating things now. No one can predict how long it will take to get these planes up and running again, if they should be up and running at all.
The Final Word on Boeing Stock
There’s no need to take a chance on Boeing stock when the company has such negative publicity and regulatory issues. This is an “F”-rated stock in my book, and thoughtful investors should cross it off of their shopping list until the circumstances improve drastically.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
