BA: Is Boeing Stock a Buy?

This past year has been quite difficult for nearly everyone, Boeing (BA) included. The aircraft maker is finally getting its 737 Max planes back into the skies after two years of inactivity. The question is whether airlines and the general public will trust BA planes moving forward.

Furthermore, if air travel does not return to normal or near-normal levels within a year or two, BA’s stock will inevitably decline. However, there is a chance BA has succeeded in making its planes safe. Add in the fact that it appears as though an effective vaccine will provide travelers with the confidence, they need to return to the skies sooner rather than later, and BA looks even more tempting.

Let’s take a look at whether BA belongs in your portfolio as we segue to 2021.

BA by the Numbers

BA is currently trading at $217. The stock’s 52-week high is $349.95. BA’s 52-week low is $89. Analysts are bullish on BA, setting an average price target of $229.06, meaning the stock has the potential to increase by more than 5%. Of the 19 analysts who cover the stock, eight recommend buying, eight recommend holding, and three advise selling.

Check out BA’s POWR Ratings, and you will find the stock has “D” grades in the Industry Rank, Peer Grade, Trade Grade, and Buy & Hold Grade components. The stock is ranked 48 out of 65 in the Air/Defense Services industry. BA is down 32.54% for the year but up over 32.20% over the last three months.

Can BA Bounce Back from the Pandemic?

BA’s success largely hinges on the safety of its 737 Max planes that have received a software rewrite in an attempt to simplify controls for pilots and ultimately keep passengers safe. However, even if BA’s 737 Max planes turn out to be completely safe moving forward, the stock has the potential to decline because people fear traveling on the cramped germ tubes that we call airplanes. Unless the coronavirus vaccines prove effective against mutations of the virus, people will question whether flying is safe.

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An extended reduction in demand for air travel reduces demand for BA planes, ultimately making it difficult for the company to make money. However, BA has business relationships outside of consumer air travel. Additional BA customers include NASA, commercial communications customers, the United States Department of Defense (DoD), aerospace prime contractors, and the Department of Homeland Security.

However, BA is largely dependent on consumer air travel to spur demand for its planes. Suppose there are any hiccups in the return to normalcy that create concern regarding air travel safety. In that case, people will hesitate to take vacations, travel for business, and hop on planes for other reasons, ultimately making it difficult for BA to climb higher.

Buy, Sell, or Hold?

It is concerning that the market for large jets made by BA has decreased in recent years. BA has reduced its aggregate delivery forecast across the next decade by 10%, though its 20-year forecast has not changed. Add in the fact that BA’s bread and butter, the 787 Dreamliner, has been reduced to one assembly line, resulting in monthly production of five planes as opposed to 14, and there is even more cause for concern.

If you are still bullish on BA, consider the fact that the company has taken on billions of new debt, serving as much-needed liquidity as the 737 Max and coronavirus pandemic play out. Though BA shares look quite tempting considering their fairly low price compared to years past, the company has an uphill battle as we transition out of the pandemic.

Above all, investors need to keep in mind that BA’s peak price was hit during a historic demand for new planes. Investors who own BA could continue holding or consider selling a portion of their shares. Those who do not own BA should patiently wait for the company to prove its planes are safe and await word that the coronavirus vaccines prove effective against mutated forms of the virus before jumping into the stock.

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BA shares were unchanged in after-hours trading Tuesday. Year-to-date, BA has declined -33.22%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.

About the Author: Patrick Ryan

Patrick Ryan has more than a dozen years of investing experience with a focus on information technology, consumer and entertainment sectors. In addition to working for StockNews, Patrick has also written for Wealth Authority and Fallon Wealth Management. More...