In the olden days before Boeing had its problems with the 747 Max, BA stock was a beast. Every dip was a buying opportunity. It is now trying to rebuild investor confidence to that point, but it’s not there yet. However yesterday, when markets were falling hard, it managed to post a +3% pop.
Where is it going from here? Spoiler alert, higher!
BA stock became a buy-and-hold during the depth of the March 2020 crisis. The perfect moment was when then President Donald Trump said they will help it. The stock was $90 per share and there was a clear window for anyone to buy it. Since then it has had several other technical buying opportunities. The major ones hit twice in June and then again in November.
But even from a big picture perspective, there was no way the world would let the company fail. We need planes and they’ve got them.
BA Stock Breakout Ongoing
Recently another BA stock trigger happened at $244 per share. The target of that suggests a recovery to $305. Those who chased the breakout enjoyed a quick 15% rally before this pullback. Healthy breakouts should have dips to reload and finish the job. The fact that Boeing stock fell back into the neckline Thursday was not a deal breaker. In fact, it’s a confirmation of the ultimate goal.
If the markets don’t correct, this one will be back above $300 by the summer of this year. The bulls are in complete control of the price action. That’s why the stock has been setting higher-lows and higher-highs for a year. Red days are scary and they cause panic, but the overall picture has not changed. Cooler heads take advantage of others’ panic actions.
This week sentiment suffered a blow because of the confusion that the 20 Fed head speeches created. The facts remain that they are fully committed to reflecting this economy through 2023. Opinions in the media do not matter they are just noise.
Virtual Monopolies Rarely Fail
Boeing has only one competitor and they are both at maximum capacity. In essence, this is a monopoly and they will have ample business for decades. Their pipeline suffered a blow in the past couple of years. First from their own “Max” mistakes, and then from the pandemic. Those episodes are behind them, so it’s onward and upward.
According to the TSA screenings, travel is on its way back. It took a long time but we are finally seriously catching up to 2019 run-rates. The current counts eclipse those from the pandemic start. I’ve compiled the data from the TSA website and tabulated the average values. The trend this year is way above last year. But more importantly, we are recovering well to the pre-virus levels.
Fundamentally, Boeing has a healthy business and its price-to-sales is only 2.4. There isn’t a lot of hopium built into the stock, so there shouldn’t be big disappointments. Management learned its lesson and it knows that the regulators are watching. It is highly unlikely that they will commit another flub for years to come.
Since they weren’t allowed to deliver many planes under order, their 2020 P&L was awful. Luckily, Wall Street investors look forward and they are already anticipating a recovery on that front. Boeing and Airbus will capture 100% of all major airplane purchases on the planet. You just cannot short such potential.
And for as long as the bulls remain in charge, BA stock will be leading the markets higher. In fact, within days, the company will likely restart delivering their Dreamliner 787 model. This should help relieve cash and inventory pressure.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.