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Is Boeing stock about to take off?


29 November 2022

Boeing stock (BA) has been in free fall since March 2021, from $269 (USD) dropping to $121 at the end of September 2022. And then came a reversal, raising prices to over $175. Are we seeing the formation of a rally, or is it just a lot of hot air that won’t last? The company has been embroiled in scandal and disaster over the last few years. The crashes in 2018 and 2019 cost Boeing over $20 billion, led to a grounding, and also prompted legislation reforming airplane certification.

Boeing’s commercial jets are not the only problem. This month, Boeing announce that it will consolidate its struggling defense unit by cutting the number of divisions by 50%. Boeing has already accumulated $1.9 billion losses on its government contract to build two new US presidential airplanes. They’ve faced heavy setbacks over the last 18 months, putting them three years behind schedule. And all this comes as aviation rivals Lockheed Martin and SpaceX  continue to gain momentum.

Lot’s of bad news, so why the recent rally? Is there something we don’t know?

Inside Boeing

Corporate insiders are spending millions on their own stock, including Boeing’s CEO David Calhoun. This may be an attempt by the wealthy shareholders to boost market sentiment and trigger a rally. It’s not an uncommon practice for a big wealthy company to try and spark a rally after releasing positive data or news. Of course, it could be that the men in suits know it’s a good investment, and they’re just capitalizing on the foreknowledge of something big.

Boeing self-forecast of free cash flow of up to $5 billion next year suggests the company has passed the crunch, but it would be wise to remember that those are internal projections based on optimistic outcomes. So, are the Boeing shareholders inflating BA stock to rebound current prices, or is there something big on the horizon?

Boeing in China

Boeing recently announced a finalized order of up to 24 Boeing 787 Dreamliners. This positive release no doubt contributed to the recent bullish run. The order consists of 16 of the longest range 787-9, with options for 8 additional jets for domestic flights. Boeing has also secured orders for an additional 200 short-haul 737 Max planes, from multiple Chinese customers, including China Aviation Supplies Holding Company. The order is said to be worth $37 billion, and it's a much-needed boost for Boeing.

The deal is good news for Boeing and the US in more ways than one. Firstly, it shows that there is still strong demand for the company's products, despite the recent problems. Secondly, it might expedite agreements between the US and China, which have been simmering over trade issues for too long now.

Without a doubt, these are some landmark events for Boeing that will likely put them back in good standing as the world’s number one plane manufacturer. And when that happens, you can be sure that stocks will fly high along with the reputation. It all seems too good to be true.

Trading Boeing

The insider purchasing did provoke the bull, but doesn’t seem to have sparked a buying frenzy – at least, not yet. Boeing's backlog of orders remains very strong, which should support future growth, assuming the planes are approved for flight by the US and Chinese aviation regulators. The Maneuvering Characteristics Augmentation System and Angle of Attack (AOA) were both updated, providing additional layers of protection.

The new software will be validated during in-flight certification tests with the Federal Aviation Administration (FAA), and Boeing engineers are confident that the 737’s reputation will be restored.

While the deals in China are very positive, they are more likely to have a long-term influence on BA Stock, and there’s nothing yet concrete about any of the Chinese interest. Until Biden shakes hands and lifts the trade wars, there’s no deal to be made. For sure, sentiment will spike BA stock if news gets out that the US is doing business with China again, so keep your eyes open for that gem. Until then, consider trading a drawback at your own risk.

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