The shares of the downed aviation giant Boeing (NYSE 🙂 recently show some signs of life. After rising below $ 100 in mid-March, inventory from the world's largest plan maker has increased by 50% in the past three months. It closed at $ 187.91 yesterday, up nearly 4% from the session in New York.
Does this rebound suggest that the worst is over for this Chicago aircraft manufacturer? Would this be the right time to bet on the company that was once a market enthusiast?
To be fair, given the myriad problems Boeing is currently facing, our response to this point is based more on informed guesswork than on an informed investment decision. But there are enough signals available to explore the possibilities.
First, it is wise to note what could potentially undermine Boeing's revival plan this year, as its market capitalization has fallen by more than half since February 2019. The greatest risk remains the raging pandemic, which resumes normal air travel.
A scenario where the world fails to find a cure or cure for the deadly coronavirus could compel many airlines to file for bankruptcy, making no commitment to purchase Boeing aircraft. As things stand now, airlines are expected to return to earnings until 2022 at the earliest, according to estimates from the International Air Transport Association.
Despite the recent increase in the number of travelers returning to the air, the number of people traveling through US airports is about 80% lower than in the same period last year, according to federal data.
Boeing has been badly affected by the collapse of aviation, with a net minus 615 orders for its grounded 737 MAX jet this year due to cancellations. The company is more focused on wide-body models used on international routes, a segment whose recovery is expected to take even longer.
But plan makers don't work with monthly commissions. Their order book is usually spread over many years. Boeing's outstanding orders, despite the cancellation, are still close to 4,800 – representing approximately 6 years of production.
"The litmus test comes next year, when airlines can properly assess whether longer-term deliveries for which they have paid less in advance should cancel," said a recent report in the Wall Street Journal. "The biggest threat to backlog, however, has been massive airline bankruptcies, which governments have averted with state aid."
MAX Return To Flight
Boeing could lose some of its lost shine if the company is able to put its grounded flagship 737 MAX back into operation after two deadly crashes in 2019. to make. The latest news on this front is finally showing some positive movements.
US FAA regulators began testing the revised flight control systems of the 737 MAX jet aircraft last week, laying the foundation for the aircraft's possible return later this year. The tests reached an important milestone in assessing the safety of the aircraft on the ground, the Federal Aviation Administration said in a statement.
"During three days of testing this week, FAA pilots and engineers evaluated Boeing's proposed changes to the airplane's automated flight control system," the agency said in the statement.
But nothing is guaranteed. Additional operational readiness assessments are also scheduled for this week. According to a report in Bloomberg, there are many steps that need to be completed before Boeing receives the green light for the jet to carry passengers again. According to the report:
“[The] FAA, along with its counterparts in other countries, must adopt new pilot training standards. An external panel of aviation experts assesses the fixes to the aircraft. And FAA must publish new regulations mandating various changes in software, wiring and other systems. ”
Even if the MAX jetliner gets all the approvals needed to fly again, its contribution to Boeing depends heavily on the aviation industry's ability to return to normal after the pandemic. Whether and when remains a very open question at the moment.
Indeed, Boeing's shares burned many investors in the past year after it was found that the company was on its way to recovery – but was subsequently hit by additional negative surprises.
As such, analysts on the street are divided about the future of the aviation giant. Of the 25 analysts who cover the stock, 14 gave it a buy score, while 11 recommend it to sell. The average 12-month price target for Boeing shares is approximately $ 174.
Bottom Line
Boeing shares seem to be strengthening after a huge dip this spring. That stability likely reflects signs of recovery in air traffic and the company's access to liquidity.
Given the current positive developments, it is also clear that Boeing is on the long road to recovery, although the turnaround will not be fast. Perhaps waiting on the sidelines is still the best strategy.
