Is Now the Time to Invest in Boeing?

After a year of setbacks, company stock has taken off

Image for post
Image for post
Image by Krzystof Kowalik on Unsplash

Fundamental Analysis

  • Boeing (ticker symbol BA) reported a first quarter loss of $1.70 per share, which was far better than the predicted losses. To put that number in comparison, Q1 for Boeing in 2019 saw a gain of $3.16 per share.
  • Revenue has seen a 6% contraction over the past three years.
  • Production deliveries fell by 66% in Q1, caused by a decrease in travel and decreased labor efficiency due to COVID-19 restrictions.
  • Operating cash flow was negative $4.3 billion in Q1, and debt grew from $27.3 billion to $38.9 billion.
  • In March of 2020, Boeing supported a $60 billion loan from the government to assist the airline industry. Although originally slated to receive $17 billion, the company stated in April of 2020 that they would not be accepting any government aid. Boeing was able to raise $25 billion in a bond sale, which will be used to support the company through the COVID-19 crisis.

Technical Analysis

  • In March of 2020, share prices reached their lowest point since 2013.
  • The company’s market cap has fallen to $76 billion, relinquishing Boeing’s position as the largest aerospace/defense stock.
  • The relative strength (blue line on the chart below), which compares Boeing stock to the performance of the S&P 500, has been consistently falling. A downward-sloping relative strength line indicates that the company is underperforming the S&P 500. Alternatively, an upward-sloping line indicates that the company is outperforming the S&P 500.
Image for post
Image for post
Image courtesy of research.investors.com
Image for post
Image for post
Image courtesy of The Wall Street Journal

Why You Should Invest

There are a few reasons why investing in Boeing might be profitable:

  • The company chose not to accept government aid during the COVID-19 pandemic, which indicates that Boeing’s leaders are confident in their ability to ride out future crises. If Boeing had accepted government aid, it would have shown financial weakness and instability within the company. Investors should be reassured that such weakness is not yet evident.
  • The economy is booming at similar levels to pre-virus conditions, which means that short-term investor sentiment is positive. This wave of growth may not last long, but it is something that investors should try to profit from.

Why You Shouldn’t Invest

Boeing is still a long ways from regaining its original dominance. Here’s why investing in Boeing might not be prudent:

  • Although they are an important company to the U.S. government, that doesn’t mean that Boeing will always stay the same. If the government has to provide financial assistance to Boeing in the future, it’s possible that the government will take an ownership share in the company. This would drastically change the nature of Boeing, which would create investor uncertainty and company instability.
  • There are still many unknown variables at play. As The Wall Street Journal reported on June 5, 2020:

Written by

Occasional Writer, Full-Time Student at Campbell University, and Editor of The Intelligence of Everything

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store