Boeing (NYSE 🙂 stock is up 28% over the past month. Shares of the suppressed aviation giant rest on a wave of optimism from investors that the worst crises the company has faced in the past two years are over.
The stock gained more than 20% in the past five years. trading days, which close at $ 269.19 on Friday. The momentum in BA shares is so strong this time that the rise in 2021 is more than three times what it delivered.
The Boeing rebound has been accompanied by a broad rise in other cyclical stocks, including airlines, cruises. operators and retailers – as investors deploy their money in areas closely linked to the economic reopening following the coronavirus pandemic.
The Chicago-based aircraft manufacturer's rally is especially striking. Boeing is grappling with the pandemic-induced air travel slump, along with grounding its 737 MAX jet – which lasted more than a year – after two fatal crashes linked to a faulty flight control system.
The latest developments suggest airlines are returning to purchase the popular 737 MAX after Boeing receives regulatory approvals to re-fly the aircraft. The space and defense giant told investors last week that it received more new orders for commercial aircraft in February than it received for the first time in 15 months.
During the month it received 82 new orders and 51 cancellations. Boeing delivered 22 commercial aircraft, including 18 of its 737 MAX jets. The MAX was grounded in the US from March 2019 to November last year, after two crashes killed 346 people.
How far can this rally go?
The number of 737 MAX jets returning to service has now risen above 100 as airlines in the US, Brazil and Europe add more flights with the recertified Jet. More than 1,300 flights were recorded in the week through March 3, with American Airlines Group (NASDAQ 🙂 operating nearly 400 flights, according to data from aviation analysis company Cirium.
While these positive developments are important in restoring confidence in this warring industrial giant, the rapid rally in its stocks also makes many investors wonder how far this rally can go. Even after recent gains, Boeing stock is still 40% below its March 1, 2019 record of $ 440.62.
Analysts at Canaccord Genuity on Friday upped their rating on Boeing's stock to buy off hold, raising their price target from $ 200 to $ 275, based on the return of the 737 MAX. outlook for travel and as the market for wide-body, long-haul aircraft stabilizes.
According to analyst Ken Herbert:
"While the recovery of BA & # 39; s widebody franchise will take significantly longer, we see stability in the 787 and 777 build rates in 2022-2023."
"However, we believe that an increase in air travel and continued incentives will allow BA to see an increase in orders after a few quarters or very low activity."
Despite this bullish activity in BA stocks, the analyst community generally does not see too many benefits from this as the airline industry still faces many challenges to fully recover from the global dip in travel.
Boeing withdrew a total of $ 8.3 billion in write-offs in the United States, ending one of the worst years in its centuries-long history. Most of these costs resulted from the company's decision to delay production of 777X wide-body aircraft, announcing that deliveries will not begin until the end of 2023. This move suggests that regulators will take much longer to certify new jets after the MAX fiasco.
Of the 25 analysts covering the stock, half still have a hold rating with a consensus 12-month target of approximately $ 232 per share.
Bottom Line
In the short term, Boeing stocks are benefiting from the trend of investors shifting their money from fast-growing stocks to industrial names struggling during the pandemic. That benefit, coupled with the improving outlook for MAX jets, is strongly reflected in the current stock price.
In our opinion, however, it will take years for the travel industry to return to normal and the hit for Boeing's earnings is long-lasting. After the final step, investors will have to wait on the sidelines for a better entry point.
