On April 29, before the markets opened, Boeing (NYSE:BA) reported a $1.7 billion first-quarter non-GAAP loss. Rather than falling on the news, Boeing stock jumped by as much as 12%. 

Since then, Boeing’s lost all of those gains, and then some. 

Moreover, Boeing stock has fallen 17% in the last month, and it’s tumbled 62% in 2020.

When I last wrote about Boeing in early March, I suggested that aggressive investors ought to consider buying its stock because, trading at $280, it had a compelling risk/reward proposition. 

In hindsight, that was an awful call. Thankfully, I did preface my argument by suggesting that the shares were only attractive for aggressive investors. 

In the span of two months, the novel coronavirus has put large parts of the U.S. economy into lockdown, including Boeing’s manufacturing facilities. With airlines reeling, Boeing was forced to go out and get itself a boatload of cash to survive what now looks like a multi-year downturn for the entire commercial aviation industry. 

If you were brave enough to buy Boeing’s shares at the stock’s 52-week low of $89 in mid-March, I think you’ll do just fine over the next three to five years. If you’re looking at buying Boeing because you think it’s cheap, I would wait for it to fall below $100, giving yourself a higher margin of safety.

Here’s why.

There’s a Good Chance the Markets Will Undergo Another Big Correction    

Bond guru Jeffrey Gundlach told CNBC on April 27 that investors should expect more pain in 2020. As a result, Gundlach shorted the S&P 500 at 2,863. 

“People don’t understand the magnitude of … the social unease … that’s going to happen,” Gundlach explained. “We’ve lost every single job that we created since the bottom in 2009.” 

Gundlach suggests the S&P 500 could retest its March 23 low of 2,192. If that were to happen, we’re talking about a 22% correction. If that’s the case, you can be sure that Boeing’s not going to remain at $127.   

Of course, Baird & Co. strategist Michael Antonelli makes the case that it’s going to be hard for the S&P 500 to fall by much as long as investors keep buying the heavily-weighted FAANG stocks.

“The biggest stocks in the S&P 500 are a huge weight now and they are all the big tech names, MarketWatch reported Antonelli saying. “In order for the market to head lower people will have to start selling the AAPL, MSFT, FB, GOOGL sector because it’s such a dominant factor now.”

But I think Muddy Waters short-seller Carson Block’s contention that stock valuations remain high is compelling. 

“In the medium term, I just can’t see equity values anywhere near where they are today,” Block told Bloomberg on May 4. “The underlying economy is on its knees and I just think that investors have yet to understand that and they have yet to see what it looks like when bankruptcies cascade through the economy.”

Speaking of bankruptcies, J. Crew filed for Chapter 11 on May 4. It was the first of what is likely to be many major retailers filing for bankruptcy over the remainder of 2020. 

My guess is that, even though Boeing found enough cash to get it through to the other side of the Covid-19 pandemic, it won’t be able to skirt the economic pain unleashed on the country.  

Boeing Stock Is More Attractive After Boeing Raised Money

It’s not often that a company increases its liquidity by $25 billion, and I think it’s a good move. I’m an anti-debt guy. In my February 2019 article, 7 Reasons Stock Buybacks Should Be Illegal, I pointed out that American corporations bought back almost $1 billion of stock in 2018. If that money were put toward paying down the national debt, it could be eliminated in 22 years.

So I’m the last person to cheer on Boeing for adding $25 billion in debt at interest rates between 4.508% and 5.930%. However, by doing so, Boeing eliminated the need to go looking for bailout money. After the 737 MAX debacle, Boeing is already in trouble with the federal government. 

Also, the debt raise tells investors that Boeing is prepared for a multi-year recovery by the airlines. It also suggests that the company knows that Covid-19 isn’t going away anytime soon and that it’s not going to be an easy journey, but that it’s prepared to fight as various issues come down the pike in the months ahead. 

“The COVID-19 pandemic is affecting every aspect of our business, including airline customer demand, production continuity and supply chain stability,” Boeing CEO David Calhoun was quoted as saying in the firm’s Q1 press release. “Our primary focus is the health and safety of our people and communities while we take tough but necessary action to navigate this unprecedented health crisis and adapt for a changed marketplace.”

Over the long-term, Boeing will grow stronger as a result of the 737 MAX failures and Covid-19, but it’s not going to happen overnight. It was refreshing to see such humility from Boeing. 

I’ll be the first to admit I was wrong if Boeing’s shares do not fall below $100 in the next three to six months. That said, I just don’t think I’ll have to. Covid-19 has had a much more significant effect on businesses of all sizes than I ever could have imagined in February and March.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.