Boeing (NYSE: BA) shares were under pressure last week after one of its new planes crashed in Ethiopia. This is one of the most widely held stocks for my clients so I am dropping in to share an update on what is happening and my outlook for shares.
Shares of Boeing were down as much as 17% last week after news hit the wire that one of its new planes – the 737 – crashed in Ethiopia. Take a look at the sharp pullback in the 12-month chart below.
The crash hit Boeing shares hard for a few reasons.
The 737 Max is one of Boeing’s newest planes – it’s been in service for less than two years. The plane’s short service history triggered concerns that the crash was triggered by a design, production or software error.
Adding to concerns about the 737 – this was the second crash in 5 months.
That led to the 737 being grounded in the US. It also created a ton of uncertainty about back orders for the 737 – which currently stands at an eye popping $600 billion.
Needless to say this is a tough crisis that Boeing is dealing with and its creating a lot of uncertainty around the company and its share price.
Today I am going to share my quick take.
Here’s the Good News for Boeing
At the highest level Boeing will survive this crisis. Boeing is one of the most powerful and well connected companies in the world – top executives, billions in cash, access to the best consultants and PR teams. Boeing is straight up a powerhouse company.
This is the biggest reason why Boeing’s share price has been on fire for the last three years, jumping more than 200% and hitting a series of new all-time highs. Take a look.
Secondly, I believe any design or production issues with the 737 will be quickly identified and corrected. This is already happening. For example, the FAA (Federal Aviation Association) quickly signed off on a Boeing software update that should address some technical issues – and gave its share price a boost.
Boeing 737 MAX upgraded software to be released in as little as a week: sources
Third I don’t see a material impact on the $600 billion backlog. Again these are fixable issues and I don’t think the crash will cause airlines to abandon the plane.
This Looks like a Chance to Be Aggressive on a Dip
No question Boeing has some issues right now – but above are the reasons I believe the company will emerge unscathed – and this actually looks like an opportunity to be aggressive on a dip.
All companies – even great ones – have issues. The best ones like Boeing find a way to work through them and correct the ship. That’s what I expect to happen here.
I am very confident Boeing will navigate these challenges and come out the other end in great shape.
How Do I plan to Proceed for my Clients?
My plan is to keep holding shares for my clients. I’m not planning on being overly aggressive right now and dumping tons of cash into shares – but for my clients who have been watching Boeing and looking for a point of entry – this looks like an opportunity.
- mike@vodickagroup.com
- mikevodicka@gmail.com
Your Investment Partner,
Mike
This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
