Boeing (NYSE: BA) is not going anywhere, but path to recovery will be long

Boeing (NYSE: BA) has been one of the hottest stocks to trade after the stock market dropped in March due to COVID. One of the most famous traders of $BA is Dave Portnoy, founder of Barstool Sports. $BA stock has traded between $90 and $230 in the span of a few months. However, is $BA a good stock fundamentally? Significant movement may result from retail investors trading the stock, but it's important to look past short-term movement and look deeper at the fundamentals. We believe that $BA is unlikely to go bankrupt, but the path to recovery may be prolonged given commercial airplanes make up >50% of revenue and profits, but demand for commercial airplanes will likely be low as airlines attempt to reduce costs to re-establish themselves post-COVID. We believe there is upside, but the opportunity cost is too high given the long recovery time.

  1. $BA's challenges started before the COVID crisis with over 300 deaths as a result of malfunctions with its 737 Max airplane. $BA underwent significant public scrutiny due to its 737 Max malfunctions that took the life of >300 passengers. This resulted in $BA taking a loss of $636M in 2019 as compared to profits of ~$10B per year in the previous two years. This setback weighed down $BA going into 2020.

  2. $BA's stock dropped as much as 75% at one point due to COVID because commercial airplanes make up ~55% of its revenue and >50% of profits. $BA stock plummeted as COVID initially spread across the U.S. because the lockdown prevented passengers from traveling and as a result, decreased the demand for commercial airplanes. As we can see, travel is slowly picking up for airlines, but there are still a significant number of commercial airplanes that have been retired until airline travel picks up. Demand for purchasing $BA's commercial planes will lag as airlines attempt to cut back on expenses as they attempt to re-establish their industry post-COVID.

  3. $BA is likely not going anywhere, but the path to recovery is likely prolonged. $BA is the ONLY American commercial airplane manufacturer, so it's likely not going anywhere. Given institutional investors own 61% of $BA (e.g., mutual funds), it would be devastating if $BA went bankrupt. Therefore, it's very likely that $BA shares will not go to $0 no matter how bad business is right now. The path to recovery will likely be a long one, however, as airlines are unlikely to purchase new commercial airplanes anytime soon.