As trading opened Jan. 25 Boeing (NASDAQ:BA) was still losing altitude after a weekend dip, and although it battled back to its opening before the day’s end, things aren’t looking great for Boeing stock.
Ed Pierson, a former senior Boeing manager and now a whistleblower, issued a report indicating the 737-MAX scandal may still not be over. The plane had only been returned to commercial service last month.
After Pierson’s report shares closed about $203.50, a market cap of $116 billion on estimated 2020 sales of $57 billion.
How bad is that? Two years ago, Boeing was trading at $440/share on 2018 revenues of over $100 billion. The company earned $17.85/share in 2018. Losses for 2020 could come in as high as $8/share.
A Closer Look at Boeing Stock
What investors want to know is whether this is the bottom. Investors thought Boeing stock hit a post-pandemic low of around $150/share in October, but our Tom Taulli now thinks those levels may need to be retested.
Survival is not an issue. Boeing will survive. It’s one of America’s largest military contractors and, still, a large source of exports. The question is whether you can make money on it.
Boeing got yet another military contract, $2.1 billion for refueling tankers, just last week. It’s seeing an increase in orders for 737s converted for use as cargo jets. In the waning days of the Trump era it reached a settlement of $2.5 billion on 737-MAX fraud charges. Critics say it got off easy. Most of the money is going to Boeing’s customers.
Last year represented the lowest Boeing production level in 50 years but that’s what bottom fishers look for. Boeing says it will fly its jets with 100% sustainable fuel in 10 years. That’s what environmental critics are looking for.
While the defense segment isn’t growing, it seems to be holding steady. Boeing’s Starliner spacecraft software has passed qualifications for another NASA test flight in March after an early flight had to be scrapped.
Boeing is continuing to win new fighter contracts. It’s also teaming up with Lockheed-Martin (NYSE:LMT) to pitch a line of new attack helicopters.
Can It Get Worse?
CEO Dave Calhoun, who took over a year ago, has created a new position in chief safety officer. Former pilot “Sully” Sullenberger said in an interview he will probably fly in the updated MAX, but he says the recent fixes “aren’t good enough.” There was also another Boeing 737 crash in Indonesia, but it wasn’t a MAX.
Boeing’s problems are China’s opportunity. Its state airlines, once a primary market, are now buying jets that are made in China. Boeing is said to be the poster child for America’s manufacturing woes.
As part of its cost-cutting efforts, Boeing is closing its Seattle research facility. It is moving more operations to South Carolina, where it is still fighting unionization. Amazon.Com (NASDAQ:AMZN) is now Washington state’s largest employer.
The Bottom Line on BA Stock
The next six months look like they will be tough for Boeing.
Bahrain’s Gulf Air is just the latest customer to ask for delivery delays. The COVID-19 pandemic is continuing to keep air travel down. Talk of an “American aerospace comeback” may be premature.
But it is coming.
Boeing reports earnings tomorrow, Jan. 27. Analysts only rate it a hold, with 4 of 21 saying sell it.
Lift-off from here will be slow. But it’s when the outlook for a strong company is at its worst that you should become interested in it. An investment in Boeing right now may look like dead money, but when it ratchets up profits again it will be too late to get in for maximum return.
Over the next five years, I can’t see you losing money on Boeing from here.
At the time of publication, Dana Blankenhorn owned shares in AMZN.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack https://danafblankenhorn.substack.com/.
