This past year was a nightmare for Boeing (NYSE:BA) and long-time owners of Boeing stock and it’s got nothing to do with the fact it’s lost more than 36% over the past year. It has everything to do with the loss of orders due to the 737 Max and Covid-19.
Despite all the negative aspects of this past year, I enter 2020, believing that aggressive investors ought to consider at least buying its stock under $200.
A Closer Look at Boeing Stock
When you subtract orders canceled or converted to other aircraft in 2020, along with orders that will never close due to many of its customers’ poor financial condition, the positive orders of 184 jets quickly turns to -1,026 for this past year.
Airbus, which has virtually had the game to itself due to Boeing’s issues with the 737 Max, only managed 268 net new orders in 2020, 65% fewer than a year earlier. Its shareholders aren’t much happier. Its stock lost 27% over the past 52 weeks.
Of Boeing’s net orders for 2020, the 737 saw a decrease of 1,034, eight more than its overall decrease. Only the 767 managed to hit double digits with 11 net orders.
Naturally, deliveries also fell for Boeing in 2020. It delivered 157 aircraft this past year, 59% less than in 2019. One unexpected negative was the 787. Boeing delivered 66% fewer 787s in 2020 with zero deliveries in the final two months of the year, a terrible way to end a terrible year, probably its worst in history.
As a result of last year’s woes, Boeing finished the year with a backlog of 4,223 aircraft, down from 5,406 at the end of 2019.
The biggest problem for both aircraft manufacturers is undelivered aircraft. Until they are delivered, they represent uncaptured revenue. After a year like 2020, this is something shareholders need resolved sooner rather than later.
Of Boeing’s 47o undelivered aircraft, 86% are the 737 Max. However, now that the aircraft is flying again in the U.S., some of these planes may get delivered in the first half of 2021.
Buy BA Stock Under $200
From mid-March last year through the end of December, BA traded between $100 and $200. If you were one of the brave souls who bought at its 52-week low of $89 during the March correction in the markets, you are to be commended on your timing. You’ve more than doubled your money in less than a year.
From the end of October through its early December high of $244.08, Boeing went on a 69% run. Pull off a few of those over the next 3-5 years and its stock will be testing its all-time high of $446.01, hit on March 1, 2019.
So, what was it that put Boeing stock into overdrive in the last two months of 2020?
Well, according to Boeing’s order report, it delivered 39 aircraft in December, accounting for 25% of the 157 aircraft delivered for all of 2020. Deliveries mean it gets paid. Cash flow growth is essential for its stock to push through $200 on its way to $300.
An Optimistic View of Boeing
I’m a glass-half-full kind-of-person. I look at the 39 deliveries and consider it a launching pad to bigger things in 2021. The glass-half-empty person will look at that number compared to 806 aircraft delivered in 2018 and think the mountain is way too high to climb–so why bother?
However, I don’t think you can ignore the fact that Ryanair (NASDAQ:RYAAY), Europe’s biggest low-cost carrier, ordered 75 of Boeing’s 737 Max in early December, a sign that airlines will come back to the beleaguered plane.
“I’ve always had faith that the order book would begin to fill with the return of the industry,” Boeing Chief Executive David Calhoun said at a signing ceremony in Washington.
Even at a 50% discount, the order represents $4.5 billion in future revenue and much-needed breathing room.
The Bottom Line
As I stated at the end of December in my last article about Boeing, Calhoun appears to be getting the job done. Now, if Covid-19 can only cooperate and permanently disappear, Boeing will begin to take flight once more.
Below $200, I see Boeing stock as an excellent buy. Long-term, if you hold for 3-5 years, you likely won’t lose buying it in the low $200s, but you’ve got to be patient.
Until it gets to free cash flow positive, it’s going to have a tough time justifying a $300 or more share price.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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.