Stockchase Opinions

Javed Mirza Boeing BA-N WATCH Jan 31, 2025

BA vs. LMT

LMT has definitely done better over the last couple of years. BA is a bit of a recovery play here. In general, where we are in the cycle, he thinks we're in phase 2 but on the cusp of phase 3. Phase 2 is typically where materials, industrials, and technology continue to do well. 

These names should do OK, but we are approaching the end of the cycle. Ultimately, at some point, we'll see rotation out of these industrial plays.

$179.140

Stock price when the opinion was issued

Transportation
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DON'T BUY

Is worried. Poor balance sheet and fears there will be a strike.

BUY ON WEAKNESS

A nightmare. They reported a horrendous quarter today, losing $1 billion a month from this machinists' strike, and they've forgotten how to make planes. That said, buy a lot of shares when they do a secondary offering (much lower than the current share price) to shore up their balance sheet to survive. Why buy? They enjoy a duopoly. After this strike, Boeing will be back to profit again. Demand for airplanes remains strong, a half-trillion dollars worth. The company has poor, arrogant management, and a lousy corporate culture.

BUY

Enjoys an oligopoly with Airbus. There's strong demand from the airlines as more people are travelling. However, Boeing has a terrible balance sheet, problems with the 737 Max, parts shortages, and now the unions. Management needs to prove it can deliver and right the ship. Airlines may prefer Airbus long term. Boeing needs to redeem itself.

WATCH

Company under pressure - recent announcements to raise debt and equity. Working capital has fallen short lately. Recent union negotiations time consuming. However, demand for products high. Will depend on how well company executes in the next 1-2 years. Time will tell. Would recommend watching for now. 

BUY
Why are shares struggling after the strike ended?

Puzzling. The big stock dilution hurt earnings power, but they enjoy a duopoly with Airbus, so eventually this will rebound.

DON'T BUY

Aviation is attractive because of structural demand and the industry structure. Only a couple of players in an essential industry. In any other industry, would be bankrupt. From the outside, can't know if it's fixed. Don't consider. 

TRADE
Positive divergence on RSI, MFI, and MACD momentum indicators.

Not a bad sign. On a 5-year chart, you can see somewhat of a floor in the low $120s. It's bounced off that. Is there potential? Yes, that bounce plus positive divergence gives you potential to perhaps reach the top of that trading range (+/- $240). 

COMMENT

It can do well in 2025 if the CEO executes. He hasn't bought it though. Shares have bottomed.

PARTIAL BUY

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.