Is Boeing stock a good buy right now?

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Astute readers would have noticed Boeing’s (NYSE: BA) mishaps splashed all over the news. But how is this going to effect the Boeing share price and is this an opportunity to buy on weakness?

Early in the new year (5 January), one of Boeing’s 737 Max 9 planes operated by Alaska Airlines suffered a scary accident mid-air. Part of the fuselage – an optional exit cabin door – blew out. Fortunately, despite the gaping hole, no one was sucked out of the plane at 16,000 feet in the air. The 737 landed safely.

Nonetheless, Boeing was immediately thrust into the spotlight. Two issues caught everyone’s attention.

First, the plane under investigation was not old; it was only delivered late last year. How did a new plane like that carry (near-)fatal faults? “This incident,’ in the words of the US Aviation regulator, “should have never happened and it cannot happen again.”

Second, this accident occurred just a few years after the notorious MCAS fault in 737 Max flight system that caused two major crashes. Is there something wrong with Boeing’s planes (eg, defective manufacturing systems)?

What happened to Boeing’s shares?

The very next day, heavy selling of Boeing shares began. Prices gapped down by more than 8 percent. This sharp decline would continue for a week (see below). Cumulatively, Boeing lost nearly a quarter of its market value in the short time from Christmas.

Should we buy Boeing’s shares now?

Given Boeing’s sharp decline, many bargain hunters are asking: Is it time to dip into Boeing’s shares?

There are pros and cons to this issue. Before buying Boeing’s stock (or any other stock), some risk assessments are needed.

The first critical risk is, can BA ‘contain’ this accident? On January 12, the US Federal Aviation Agency (FAA) issued a statement that it will continue to ground all Boeing 737 Max 9 (171 planes in total) “until extensive inspection and maintenance is conducted and data from inspections is reviewed”. 

After grounding 737 Max 9 planes, extensive checks found more loose bolts on these planes. In Japan, cracks on cockpit windows were found in one of Boeing planes. At this point, the schedule in getting these Max 9 planes back into service is uncertain. Hence, the turbulent share price.

Secondly, can Boeing retain customers’ confidence after a series of accidents on 737? To bolster confidence and address customers’ concerns, Boeing is inviting its customers to its factories. The Seattle-based manufacturer is even drawing Ryanair’s engineers to supervise the construction of Boeing planes. At the same time, Boeing named retired Admiral Kirkland Donald to lead its the company’s quality management system for commercial airplanes. Hopefully, all these steps may help Boeing to make better-quality planes.

The downside is, all these containment tactics take time to bear fruit. And it will most likely also incur more financial costs. Remember, Boeing is already quite heavily indebted. Last I checked, Boeing’s consolidated debt was north of $50 billion ($52 billion) while cash and marketable securities at hand totalled only $13 billion. Free cash flow guidance came in at $3-5 billion; net loss for the first nine months of the year. The financial leeway is tight.

The upside is, that Boeing is still one of the most respected manufacturers in the world. It has a backlog of nearly $500 billion worth of commercial plane orders. Its Global Service department is profitable.

More critically, some airlines are still buying 737s despite the unpleasant headlines. India’s Akasa Air is reported this week to be buying 150 737 Max.

What could the Boeing stock price be in 2025?

Therefore, there is a case for investing in Boing at $200. This technical floor, however, will hold as long as investor confidence is retained. Another slip-up by Boeing will see this sideways support melt away quickly. BA’s volatile share price means investors must be patient and scale in over time, preferably on price weakness.

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