I Challenge You: Tell Me Why I Should Like Boeing?

Boeing and Airbus (AIR.PA) are the two largest aircraft manufacturers in the world. Boeing, though, has fared much worse as a company. That was true even before the Covid-crisis and Boeing's problems with grounded planes due to safety issues. BA dropped from an all-time peak of $446 in early 2019, to just $89 at the nadir of the Covid-panic. The drop might have been overdone, yet much of it was justified due to horrendous fundamentals. From 2019 through this year Boeing almost certainly racked up about $16.7 billion in cumulative losses. That amount wiped out the net profits earned during the firm's boom years of 2017 and 2018. It remains anybody's guess what BA might earn, or lose, in 2023. The 19 analysts submitting projections on Yahoo Finance range from a loss of $2.45 per share to a gain of $2.30. More recently, BA shares have been on a roller coaster. They fell almost 29% between Aug. 30 and Sept. 30, bottoming at $120.99 intraday. Since then, BA shares took off. From Sept. 30 through Nov. 10, the stock surged by more than 48%. Upturns like that get traders' juices flowing. Momentum buyers stepped in, and more than a few equity research houses began recommending the stock. In its latest issue, released on Nov. 26, Value Line rated BA as a buy. So does Morningstar, which labeled BA a 4-star, out of 5, purchase recommendation. As I go over Boeing in more detail you might join me in asking, What have those guys been smoking? From 2013 through 2016, well before BA's safety problems surfaced, the stock traded with an average price-to-earnings of 17.9-times, accompanied by around 2.43% in current yield. At its Wednesday quote of $176.49 it commands 88-times Value Line's $2.50 earnings per share estimate for next year. Dividends were suspended in the second quarter of 2020 and have never been resumed. Where is the appeal? When BA earned from $5.96 to $10.84 during 2013 - 2016 its highs for the year never approached its current price. Best entry points for BA (green-starred below) came when BA was offered for between 9.4-times and 13.3-times earnings. Should have sold moments (red-starred) kicked in when BA sold for between 21-times and 28-times earnings. Today, there are no earnings and no dividends, yet the stock is well higher than it sold for when times were good. How crazy is that? Here's the real kicker that goes along with that thought. There was irreparable harm done to Boeing's balance sheet and equity structure over the past four years. Long term debt rocketed from under $9 billion to about $51 billion. Ouch. Debt service expense is now a major problem let alone getting to the point where BA can begin paying down any debt. Shareholder equity declined from a positive $5.68 billion (in 2012) to an estimated negative $17 billion this year. Interest is not being earned, meaning BA needs to borrow more each year simply to stay current on its old debt obligations. Profits in 2012 were about $3.9 billion. Losses in 2022 are expected to be greater than $4.2 billion. There is simply no positive news to be seen. Would any subscribers out there like to make a case for buying Boeing right now, after seeing this information? If so, the comment section is wide open for your reasoning. Quantitatively based Fast Graphs was the only research service I found that took a more realistic view on what Boeing might be selling for by the end of 2023. I disagree with their presumed 19.74 multiple as normal for Boeing but Fast Graphs' calculated Dec. 31, 2023, $66.16 value for BA is based on their opinion that the company can earn $3.35 per share next year. If Boeing was not a national priority to be kept alive, due to national security issues, it may well have gone through bankruptcy already. The idea that BA worth more today than when things were much, much better is ludicrous. Don't get caught up in momentum-based hype. If you own BA consider selling into strength. If you were thinking about buying, think again. Speculative traders might well benefit from shorting naked calls or buying puts.

I Challenge You: Tell Me Why I Should Like Boeing?

Here's why the case for buying BA looks a little like B.S.

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