Boeing Co. (BA) has an uncanny ability to bounce back from bad news, motivating many analysts to advise buying the stock on the latest negative headlines involving the aircraft giant.
The stock opened down about 12% here on Monday after a tragic Boeing 737 Max 8 crash in Ethiopia killed 157 passengers.
Since the open, the stock has climbed back to a lighter loss as trading has progressed. The situation on the day's trading is a reminder that Boeing's stock has proven resilient to terrible news in the past and may be able to mitigate issues surrounding its Max 8 planes over the longer term.
Most relevant to draw from is what happened after a Max 8 crash that killed 187 people on board a Lion Air flight last October. While Boeing shares reacted similarly at that time to the action seen on Monday, they did recover soon thereafter.
"The Ethiopian 737 Max crash is a near-term overhang given it looks similar to last October's Lion Air disaster," Cowen analyst Cai von Rumohr said. "The crash's potential root cause likely is fixable, and we don't see this as a long-term risk for BA or key 737 Max suppliers."
Indeed, up until today's drop in share price, Boeing's stock had run 25% since the Lion Air safety concern hit headlines, vindicating von Rumohr's view.
"The near term could look worse for Boeing depending on what the FAA does," he added as a caveat. "But we don't see this as a long-term problem, and the traveling public has had a very short memory of previous catastrophic crashes."
To be sure, the fact that this crash is the second of the same model, in a similar fashion, in such a short span of time adds to apprehension among many market participants.
However, analysts along Wall Street are calling for investors to get greedy amid the anxiety.
"After a second fatal accident on the new 737 Max in less than 6 months, we anticipate heightened volatility in Boeing shares," Morgan Stanley analyst Rajeev Lalwani acknowledged. "Though it is early to draw conclusions, there may be concerns of disruption around safety, production, groundings, and/or costs, all of which should be manageable longer term."
Lalwani added that Boeing should be able to return to normality over the course of the year, even if a "worst-case scenario" grounds the fleet of new planes for a period of remediation of safety issues.
"We remain positive on shares of the company and do not expect the multiyear cash flow growth narrative to ease," Lalwani said. "Any notable pressures may lead to a buying opportunity once the program is on a path to normalcy like we saw earlier in 2018, thus our recently updated price target of $500 remains intact."
The consensus among analysts about Boeing remains a strong buy on Monday despite the near-term overhang as many expect the problem to fade as Boeing quickly works with authorities to address any potential problem.
A FactSet poll of analysts sets the price target for the airline manufacturer's stock at a lofty $455.95, suggesting many believe the company can climb through the near-term turbulence aroused by this latest air tragedy.
