Boeing valued at $122 Billion – A Good Buy?

Boeing

The Boeing Company (NYSE: $BA) suffered catastrophic losses during the coronavirus pandemic as a result of the decline in airline sales and the ongoing travel restrictions. In fact, the plane manufacturer had seen it’s stock collapse by 72% to its lowest point in over a decade. 

Despite the impact of the pandemic, we believe the shares will climb back to its previous peak level as a result of the following reasons:

The Trump administration’s agenda is planning to continue its spending on infrastructure and defence. Boeing is one of the companies that is expected to receive support from the government since it has a large military aircraft division. 

 Loan guarantees from the federal government will prevent the jet maker from going bankrupt or having to issue additional shares to fund the operations. 

Boeing’s nature of operations contribute massively to why this would be a long-term buy. It has always been the largest aircraft manufacturer on the planet in an uncompetitive industry. (too big to fail)

First, the aerospace business has long development cycles. It requires large investments to build new aircrafts and capital-intensive manufacturing processes with highly-skilled engineers.

Second, Boeing’s 5-year-stock chart up till March 15 2019, the overall trend is a steady upward climbing curve, which indicates that the stock is a valid investment over a 5 year period of time by providing stable, incremental returns.   

Boeing stock’s performance is tied to travelers’ capability to return to the sky. In the past week, 2.6 million people passed through the checkpoints of the Transportation Security Administration in U.S. airports – a 228% increase compared to two months ago.

This improving outlook will certainly boost Boeing shares, lifting the price by 65% over the past month.  

In the next 20 years, Boeing is projected a need for over 39,600 airplanes valued at more than $5.9 trillion.

However, as Warren Buffett says:

“Uncertainty actually is the friend of the buyer of long-term values”.

Boeing’s previous growth patterns and adaptations to technological changes will help it to emerge back to being the largest aircraft manufacturer across the globe.

We like the shares – BUY. 

 

Nitya Bhatt

Equity Research Analyst

Nitya is currently studying business administration at the Schulich School of Business in Canada. During his undergraduate studies he worked in several business development, sales, and leadership roles. Nitya began investing in stocks at an early age which further grew his interest in finance and trading. He has written numerous articles related to economics and politics. However, when he is not busy writing or researching, he enjoys playing badminton competitively, reading science fiction, and hiking in the wilderness.

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