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Boeing's Drop Tempts Investors

Boeing (NYSE: BA) can't catch a break in 2024. 

In January, an Alaska Airlines (NYSE: ALK) Boeing 737 MAX 9 experienced a rather unexpected mid-flight event when its emergency exit door decided to take a spontaneous vacation and flew off, leaving a gaping hole in the plane's fuselage while soaring at an altitude of nearly 16,000 feet.

The next day, the Federal Aviation Administration ordered all Boeing 737 MAX 9 planes in the U.S. to be temporarily grounded. The Department of Justice also launched a criminal investigation into this Boeing jetliner blowout, according to The Wall Street Journal.

There are so many safety investigations against Boeing right now that it would take multiple newsletters just to go through all of them.

And let's not forget Boeing's history, with two 737 MAX 8 crashes in Indonesia and Ethiopia in 2018 and 2019. Those unfortunate incidents resulted in the tragic loss of 346 lives and a temporary global grounding of the jets.

Just when you thought things couldn't get any worse, a report by The New York Times this week revealed that the FAA conducted a six-week audit of Boeing's production of the 737 Max jet. And guess what they found? Dozens of problems throughout the manufacturing process.

Unsurprisingly, all these mishaps have taken a toll on Boeing's stock price. It's down a whopping 27.50% this year. 

But, some investors see this as a golden opportunity to buy the stock while it is low. It is nearing its 52-week low, a key indicator of a good stock price.

It's hard not to wonder what the future holds for this aviation giant. Will they bounce back from these setbacks and soar to new heights? Or will they continue to stumble?

The Bull Case

Believe it or not, there are some pretty compelling reasons to consider buying Boeing. First off, the stock is down 27.50%. Who doesn't love a good bargain, right?

The company’s revenue has been soaring like a majestic eagle. From 2022 to 2023, it went from $66.6 billion to a mind-boggling $77.8 billion. It also has over $4 billion in free cash flow.

Even with the mishaps in the commercial business, Boeing has a secret weapon up its sleeve – a robust defense business. While their commercial division may have hit a few turbulence patches, their defense business is solid. So, even if their commercial planes are having a rough time, their defense contracts are there to save the day.

In March, American Airlines (Nasdaq: AAL) placed an order for 85 Boeing 737 MAX jets. And just to add some extra icing on the cake, the FAA cleared Boeing's 737 MAX 9 aircraft to resume flights at the end of January.

If you're looking for a stock that's on sale, with soaring revenue, a robust defense business, and some recent wins under its belt, then Boeing might just be the ticket. 

The Bear Case

First off, let's talk about Boeing's recent financial performance. They reported a loss of 47 cents per share in the last quarter - before all these recent safety problems.

The company also suspended its forward guidance for 2024 due to recent safety concerns, which means it can’t offer investors a financial outlook for the year.

Several airlines have also cut their expectations for deliveries from Boeing this year because of the company's problems. 

Boeing is also facing increased competition from Airbus (OTCMKTS: EADSY). United Airlines (Nasdaq: UAL) is reportedly ditching their Boeing 737 Max 10 orders and going for the new airplane from Airbus instead.

Now, I know what you're thinking. The stock valuation is low, so it must be a great deal, right? Wrong! It's what we call a "value trap." Sure, it might look cheap, but that's because it won’t take off.

All of these negatives outweigh the positives.

Boeing stock is a bumpy ride filled with financial losses, safety concerns, competition from Airbus, and a stock valuation that's too good to be true.

Comparing the Field

Boeing’s stock price is $182.53 (-27.50% in 2024).

And Boeing’s competitors:

Airbus’ stock price is $44.38 (+15.33% in 2024).

Lockheed Martin’s stock price is $435.82 (-4.45% in 2024).

From the Expert Analysts

According to the 21 Wall Street analysts documented by TipRanks, Boeing has a price target of $261.21, which is higher than the current price. Among those 21 Wall Street analysts, 15 listed the stock as a “buy,” 0 listed it as a “sell,” and 6 listed the stock as a “hold.” That means the majority of analysts favor the stock.

According to analysts on Benzinga, Boeing’s stock is listed as “buy.” One analyst predicts that the price could jump to $290 and another analyst predicts that it could be $200.

Note: Most of these analysts made these predictions before the recent problems with the company.

Machine Learning Prediction

The blue line is Boeing’s price in the past year and the red line represents a machine-learning prediction from Early Bird for the next three months. The machine learning model is from Google algorithms and was trained on public stock data that Early Bird collected.

This machine learning model predicts Boeing will drop to $178 by June.

Early Bird’s Flight Plan

As it currently stands, most investors should avoid buying Boeing’s stock. There are just so many questions and unknowns about the company.

Until Boeing turns things around, this is not a safe stock (or a fully safe airplane for that matter).

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The contents of Early Bird are intended for informational and entertainment purposes only. They do not constitute trade or investment recommendations and they are not financial or legal advice. Readers are encouraged to consult with licensed professionals for personalized guidance regarding their specific financial or legal situations.