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03/15/2019The world's largest aircraft manufacturer under pressure Should investors buy Boeing shares now?
Christoph Rottwilm
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AFP
Boeing 737 Max in the service of American Airlines: The aircraft model causes problems for the manufacturer and has the stock price collapse.
The Boeing share has collapsed because of the problems with the Boeing 737 Max. By contrast, the order books of the Group are full. A chance to get started?
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Boeing's crash model: These airlines use the 737 Max
The speculators on the New York Stock Exchange do not torch long - piety or not: A plane crash offers them above all a chance for quick money. Since the beginning of the week on Wall Street the flowering of warrants on Boeing shares stock market chart showing. One of the most popular contracts, the Wall Street Journal reports, includes calls that generate a profit when the aircraft manufacturer's stock climbs to $ 400 or more.
However, the paper is currently far from that. Since the beginning of the week, the Boeing share has lost around 12 percent in value. Most recently she listed on Wall Street at $ 373. On Friday the previous week, the closing price was $ 422. The reason for the price slide goes for days by the media: Last weekend crashed over Ethiopia from a machine of the type Boeing 737 Max, 157 people were killed. It was already the second serious accident with a plane of this type in a short time. In October of last year, 189 people died in a jet of the Indonesian Lion Air. Because the crashes are apparently similar, it seems likely that there is a connection and that this has to do directly with the aircraft model and the technology used therein. The result: All Boeing 737 Max jets should stay on the ground for the time being ("Grounding"), until the causes of the crashes are clarified and if possible it is ensured that in the future no further misfortune can happen for the same reason.
A sharp drop in price due to an event that shakes a company - that's a great find for speculators, who rely almost on principle on at least partial price recovery. But not only such lucky players can currently deal with the paper from Boeing. Even reputable investors ask themselves the question: is it after the price loss of more than 10 percent within a few days, perhaps a good time to join the world's largest aircraft manufacturer?
No question, the arguments against weigh apparently hard: The global "grounding" of the 737 Max planes hits the Group at a sensitive point. The model is considered to be a great source of hope for the mass-market business of the company (if in this industry it is even possible to speak of significantly lower numbers compared to the car industry). Almost 400 aircraft of this type have already been delivered by Boeing, several thousand more are in the order books of the group. The 737 Max, that's for sure, was the bestseller of Boeing.
The shutdown of the aircraft, doe according to the US aviation authority FAA can last several months, means for the company not only an immense damage to the image, but also a tangible economic. With the Scandinavian low-cost supplier Norwegian, the first airline has already announced claims for damages, others are likely to follow.
Added to this is the risk that airlines might turn away due to Boeing's problems, usually in favor of their big competitor Airbus. There are already announcements and hints in this direction from the Indonesian Lion Air, VietJet Aviation or Kenya Airways, which was affected by the first crash last October. Alone, it is estimated that an order volume in the mid double-digit billions of dollars range in the fire.
Order volume of $ 600 billion - and behind it a question mark
Overall, Bloomberg has determined that the orders of the approximately 5000 machines of the type 737 Max - including those already delivered - at Boeing have a volume of 600 billion dollars or more. The company has planned a large part of these revenues for the future - but since this week, the management has probably put a question mark behind it.
As a guide, Boeing's total revenue last year was $ 101.1 billion. This was 8 percent more than in the previous year and the highest value the Group has ever achieved. The profit rose even by nearly a quarter to 10.5 billion dollars, also a record value.
For the year 2019, CEO Dennis Muilenburg made an optimistic forecast earlier this year, with a planned sales increase of up to $ 111.5 billion. However, the Boeing CEO was not able to foresee the current development.
The volume of 737 orders shows that there are plenty of reasons to be more cautious about Boeing at the moment and stay away from the stock better. At least in a short to medium term view. On the other hand, investors who are really long-term oriented may come to a different conclusion when assessing the situation. Above all, the question arises as to whether the recent development actually threatens the existence of the Boeing Group. If you do not believe that and instead assume that the company will somehow survive the current crisis, the stock may also be an attractive investment opportunity at the current price.
The reason for this comes from a bird's-eye view: Boeing is the world's largest aircraft manufacturer. In fact, there is only one real competitor, the US group and Airbus from Europe largely share the global business of widebody aircraft among themselves.
Page 1 of 2
- 1st part: Should investors buy Boeing shares now?
- Part 2: There has been a global grounding at Boeing before
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