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Sign of Some Upside Ahead for Boeing Stock

Todd Shriber

Boeing (NYSE:BA) stock isn’t for the faint of heart for multiple reasons, including the company’s penchant for regularly being the bearer of bad news. After dealing with an array of bad news and controversy stemming from issues with the 737 Max passenger jet, Boeing stock was bludgeoned by the novel coronavirus pandemic.

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Boeing stock reflects the litany of woes facing the company. Sure, it’s up 62.62% from its 52-week low, but it needs to more than triple to get back to its old highs.

Not that long ago, Boeing was the largest component in the Dow Jones Industrial Average. Today, it’s merely the number 10 member of the blue-chip index.

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How the U.S. and global economies look after Covid-19 is put to bed and the 737 Max are lingering issues for Boeing. Investors mulling the stock must acknowledge as much, but they also must consider so incremental though positive news emerging in recent weeks.

Returns and Reopenings

Let’s start with the 737 Max – the author of much pain for Boeing investors following two fatal crashes, the aftermaths of which Boeing leadership bungled. The plane – the newest in the Boeing fleet – has been grounded since March 2019, but that could soon change.

Southwest Airlines (NYSE:LUV) CEO Gary Kelly recently said his company’s 737 Max fleet could be airborne again as soon as next month. That’s relevant because Southwest is Boeing’s biggest Max customer. Boeing is hoping to start delivering new versions of the jet to other customers later this summer, but that particular timeline has a track record of slippage. However, existing customers getting older versions of the plane back in the skies is a step in the right direction.

The bottom line with 737 Max production is it’s already ratcheted down. Boeing may not get those new planes to market to meet the most optimistic time frames. That would be a near-term pinch for the stock, but there are positive factors to consider, including Boeing’s leverage to the reopening of the U.S. economy and progress on a coronavirus vaccine.

Up almost 7% over the past week and 12.21% over the past month, Boeing stock is reflecting some reopening/vaccine ebullience. Obviously, Boeing isn’t a biotechnology company that’s directly working on a virus vaccine, but consider the following: speculation that a coronavirus vaccine could arrive sooner than expected and that economic re-openings are beating expectations, are among the catalysts powering previously moribund industries like commercial aviation.

Covid-19 troubles are among the primary factors ailing industrial names this year. However, as air travel bookings are improving more rapidly than hoped, it’d be reasonable to expect upside in Boeing stock would follow suit.

Bottom Line

Another positive, though already baked into the stock, is that there’s an appetite for Boeing securities. Late last month, the company easily moved $25 billion worth of commercial paper at maturities of three to 40 years.

Buyers of those bonds, particularly the long-dated fare, wouldn’t be acquiring that debt if they thought Boeing was going belly up.

Assuming the 737 Max is re-certified later this year, Boeing could return to cash flow positive as soon as 2021. That would enable management to shape up the balance sheet.

Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.

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