Opinions
Jim Cramer - Mad Money
Boeing
BA-N
BUY ON WEAKNESS
Mar 13, 2024
Stock price when the opinion was issued
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The CFO recently made comments: the troubled 737 is closer to resuming production, as the 787 could increase production later this year. Really, the 737 is more important. Also, their ailing defence business is starting to stabilize and recover, though their commercial business could improve. Maybe cash flow will improve; there are signs it is already. They won't be hit by tariffs, because 80-90% of their supply chain is in the US. They have a half-trillion-dollar backlog Last Friday, the US Air Force awarded Boeing the contract for fighter jets. He'd like to see a few good quarters of stronger results, and it's early in this turnaround though it's getting its act together. Also, Boeing enjoys little competition and airplane demand is strong.
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He hopes their troubles are behind them but as an equity investor is not sure if he sees the light at the end of the tunnel yet. There are only three companies in the world that make planes and global travel is growing. It has some logistics issues and has received some significant slaps on the wrist by the transportation board. There is a lot of debt but the order book is pretty filled up. He thinks there has been some change in management.
It was a core holding as we came out of Covid. After all, there are only 2 companies building planes and Boeing was coming out of the pandemic and the world would return to travel. Problem is, he bought Boeing a lot earlier, before shares plunged and their plane accidents kept happening. It became a clown show. True he made some money in the 2021 rally, but Boeing kept dropping the ball like taking forever to retrofit its Boeing 737 Max and getting them back in the air. He finally sold in spring 2022 when thousands of these jets were grounded. Then the feds grounded their 787 Dreamliner, a huge seller. Then, the company reported terrible quarters. Then, China didn't order airplanes as he had expected, given the icy relations between China and the US. His mistake was selling just when shares troughed and he should have been buying because he ran out of patience and didn't stick to his original thesis (a duopoly in plane-making driven by strong post-pandemic demand).