what happened
Shares of Boeing (NYSE: BA) lost height on Monday after a downgrade by the analyst. The stock fell to 4.6% as investors devoured the long-term recovery for the aviation giant.
Approximately
Boeing and its investors will be happy that 2020 is over. The stock lost 34% for the year and fell by almost 75% at one point, due to the continued issuance of the 737 MAX and the impact of the pandemic on commercial airlines.
The year apparently ended in a positive way, with the 737 MAX re-certified to fly on the ground again after 20 months and a COVID-19 vaccine offering hope that the worst for aviation is over. But Boeing has a recovery of more than a year and has no quick fix.
Image source: Boeing.
Bernstein analyst Douglas Harned downgraded Boeing on Monday to outperform the market, noting that an expected increase in 787 Dreamliner sales in the fourth quarter never materialized. Boeing delivered only one 787 in December, and not one in November, and the aircraft is still plagued by questions about production quality.
The 787 kept Boeing in the air through the early days of the 737 MAX nature, but Boeing will find it difficult to rely on revenue from the aircraft to fuel a surge elsewhere. Boeing incurred $ 25 billion in new debt in 2020 in response to the dual crises, and needs a surge in aircraft sales to pay off the debt.
Now what
Boeing stands at a crossroads. The worst is probably behind it, and with the stock still trading well below the stock ahead of the 737 MAX issues and pandemic, it is tempting for investors to get on board and hope to ride the wave upwards.
But Boeing faces a huge challenge in delivering aircraft in this area, and it is unlikely to see production at levels accepted when the stock flew fast. And Boeing’s current selling price is actually much higher than in the last three decades, raising questions about how affordable the company is.
I’m positive about the eventual recovery of aviation, but there are much better alternatives to Boeing for those who want to invest based on the recovery. Investors should now be very careful with Boeing.