The Boeing stock (BA) bottom may be forming. The simple investment thesis? Things just can’t get any worse for the beleaguered 737 Max maker.
Not exactly a chest thumping call by any means, but there is logic to it.
“You are going to have some tax loss selling probably into the end of the year on Boeing. But look, this is about the worst news you are going to get. So the stock will probably overreact a little bit, but you are probably close to the bottom here in the stock,” said BNY Mellon chief strategist Alicia Levine on Yahoo Finance’s The First Trade.
To be sure, the bad news out of Boeing on the 737 Max front may have just climaxed.
Boeing said Monday it would suspend production of the Max in January. The decision — which follows two deadly crashes of the now grounded airplane — marks Boeing’s largest assembly line shutdown in two decades.
The stock closed down roughly 4% Monday on the news, but rebounded on Tuesday to finish the session flat. Boeing’s shares are up nearly 2% year-to-date, staying surprisingly resilient in the face of the 737 Max turmoil.
Investors could be starting to sniff around Boeing —well off its February 2019 52-week high — now that the production halt is out of the way and it didn’t slash its dividend, as some on the Street speculated.
From a valuation perspective Boeing’s stock could be viewed as a bit compelling at current levels. Boeing’s shares trade on a forward price-to-earnings multiple of 16 times, a discount to its five-year average multiple of 18.8 times.
It’s not often you get to buy into a company with a wide moat and dominant industry position (it’s only Boeing and Airbus making airplanes, after all) at a valuation discount.
“If you haven’t sold it already, and didn’t sell it into the rallies off the bad news, I have a hard time pulling the rip chord when it seems like the worst news is already out there. If you think about it, how much worse could it get. I think you have to close your eyes, swallow it for a little while. I don’t like selling from weakness, I like selling into strength,” said Heritage Capital chief investment officer Paul Schatz.