Should you stay away from Boeing stock?

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boeing stock

Boeing stock has been taking a serious hit this year, with a plummeting 35% that’s got everyone talking. Experts are now suggesting that there might not be a happy ending in sight, at least not in the short term. 

Recently, Chris Olin, an analyst at Northcoast Research, published a review that highlights some of the strange events that Boeing has gone through. From aircraft parts falling from the sky to legal struggles, it’s been a wild ride for the company. The big question now is, how will this story end?

‘Criminal coverup’ claims

It all started on October 29, 2018, when a Boeing 737 Max crashed into the sea, resulting in the loss of all lives on board. In March 2019, another crash occurred in Ethiopia and its final report indicated that the design of the plane was flawed, and there were errors made by the airline and its staff.

A whistleblower from Boeing spoke out last week, claiming that there was a “criminal coverup” surrounding these and other malfunctions. Ed Pierson was one of four individuals who testified in front of the Senate’s Permanent Subcommittee on Investigations on Wednesday. Pierson had been a senior manager at Boeing’s 737 factory and had retired in 2018, prior to the first Max 8 crash.

After a 737 Max 9 lost its door plug mid-flight in the Alaska Airlines blowout back in January, the National Transportation Safety Board found missing bolts designed to secure it. Boeing had removed the door plug in the factory to repair broken rivets but told investigators it didn’t have documentation of this work.

During his testimony on Wednesday, Pierson accused Boeing of a “criminal coverup” regarding the investigation. He also claimed to have personally given records to the FBI that contradicted Boeing’s claims of not having documentation. In response, Boeing emphasized its efforts to promote “a safety culture that empowers and encourages all employees to raise their voice.”

Boeing going into space

With so many things to care of on land, Boeing is shifting its focus to space exploration with the launch of the Boeing Starliner capsule. The idea sounds exciting, but shareholders are hesitant to embrace it. Even so, Boeing stocks went up a little last Thursday.

Next month, the Boeing Starliner crew capsule will undergo a test flight, marking its first manned launch. After over 15 years of development, the Starliner is finally reaching its zenith. But, the project has been both overdue and over budget, with many reports criticizing the long wait and high cost.

Some people are skeptical about Boeing’s ability to ensure safety in space, given the company’s recent mishaps with aircraft. Still, the Starliner could be a way for Boeing to regain its footing in the aircraft market. In fact, many are looking towards a potential partnership with NASA to spice things up. Regardless, Boeing is facing a huge challenge in rebuilding customer trust.

Upcoming reports

Boeing will publish a quarterly earnings update this Wednesday (April 24), but the outlook is not too rosy. Analysts predict a less-than-stellar report, with insight into the drop in commercial aircraft sales, developments in the FAA investigation, and adjustments to long-term production plans. 

According to Olin, the full-year outlook seems bleak. The company now expects a slight earnings loss of $0.41 (compared to the previous +$3.25), and a negative FCF target of $3.6 billion. What’s behind these estimates? Well, there’s more FAA scrutiny on the 737 assembly lines, some credible claims from the 787 whistleblower that Boeing is “putting out defective airplanes,” a 90-100 unit cutback in the commercial jet delivery guide, and a whopping $750 million charge in the BCA segment. 

But it’s not just about the numbers. Olin emphasizes that there are concerns beyond the income statement and that abnormal factors could lead to balance sheet instability. 

Should you buy Boeing stock?

Olin has downgraded the rating for Boeing stocks from Neutral to Sell. His $140 price target suggests that shares will drop another 18% from current levels. 

However, most analysts seem to disagree with Olin’s prediction, with 17 out of 25 ratings qualifying the stock as a Buy. If we go by the $232.36 average price target, it’s expected that the shares will surge about 37% over the next 12 months. 

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