In February 2019, a few months after a Lion Air 737-MAX crashed in Jakarta, killing 189, Boeing (NYSE:BA) stock peaked at about $440 per share. Now you can buy Boeing stock for nearly half the price, at about $240.
Through most of 2020, shares traded at less than $200.
Boeing lost credibility and altitude through 2019. But it was the pandemic that really crashed the shares. This past February shares were still trading around $340 each.
So with the pandemic’s end in sight, analysts rate the stock a moderate buy. One has a price target of $306. But half remain on the fence.
Boeing stock has become like Schrodinger’s cat. Is it alive? Is it dead? Or should you, as one of my Christmas T-shirts seemed to say last year, leave?
Boeing is Dead!
Many times, when a stock rises or falls, it’s due to the behavior of the market.
In this case, it’s about fundamentals.
Boeing’s debt has nearly tripled this year, reaching $57 billion at the end of September. Revenue that peaked at over $100 billion in 2018 should be just over $60 billion this year. There has been $14 billion worth of negative operating cash flow so far in 2020.
You can look at that as the glass being half full. Boeing has the cash to survive. The 737-MAX is once again cleared to fly. There is still an order backlog, for over 3,000 jets. But over 1,000 orders have been cancelled this year, either at the buyers’ request or because they can’t afford to take delivery.
ABC recently had a long report on the scandal and it’s clear from their reporting that the scars are still fresh. Boeing fired CEO Dennis Mullenberg in January. His replacement was board chairman Dave Calhoun from Blackstone (NYSE:BLK), a former General Electric (NYSE:GE) executive.
Calhoun has kept the plane in the air, but barely.
Boeing is Alive!
Despite all the bad news, Boeing still thinks the future looks good.
Boeing recently issued a 20-year forecast expecting China to buy 8,600 new planes by 2040. That’s 7% more than predicted before the pandemic. That’s a prize worth $1.4 trillion. That’s despite China’s desire to wean itself from foreign jets. It showed off a competitor to the MAX at a recent air show.
Boeing’s military unit remains strong, and not just in the U.S. Boeing is America’s second-largest military contractor, although that still represents less than one-third of the business. Military and space revenue was down just 2% in the most recent earnings report. The government is still paying Boeing’s space bills, with its Starliner expected to launch astronauts next year.
The Bottom Line for Boeing Stock
Even if air travel returns to normal, it will take years for Boeing to come back.
Just like its customers, Boeing took on enormous debt to deal with the pandemic and that debt must be paid back.
When the 737-MAX scandal began, Boeing was the unquestioned aviation leader. Now it has lost ground to Airbus, the Chinese, and SpaceX. Its plans to replace the 737 have also been set back. Udvar-Hazy of Air Lease questions whether Boeing has the resources to beat Airbus’ next jet.
Whether Boeing is alive or dead, I think my T-shirt had it right. The stock may rise on speculation, but it won’t return to that 2019 high any time soon.
I’m going to leave it.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Write him at email@example.com or follow him on Twitter at @danablankenhorn.