The investors on Boeing Stock may be far away from “value investment”

Jul 11, 2020

“The market’s recent exuberance for reopening economies and an early resumption in air traffic has driven a strong rebound in aerospace shares,” updated by Andrew Gollan from Berenberg, a famous financial group, in a nearly published research report. However, he was really concerned. “We suggest investors lock in any gains”, base on a measure of a slower-than-expected 737 MAX recovery and weak second-quarter results, set to be reported around the end of July, the two factors that could drive shares lower over the near term. 
 
This eye-catching stock has been on a wild ride in 2020. Shares dropped below $90 in March before hitting more than $230 in June. Year to date, the stock is down about 46% compared to the beginning of this year. Covid-19 is the biggest reason. Demand for commercial air travel has been hammered by the pandemic and Wall Street isn’t sure how fast demand will come back. Less than 40% of analysts covering the stock rate share the equivalent of Buy. Moreover, some updates from ODA(Organization Designation Authorization) and FAA(Federal Aviation Administration)’s report about what happened about that famous tragedy in 2018 would not be dismissed, as reported by Reuters, such as:
 
● Boeing failed to submit certification documents to the FAA detailing changes to a key flight control system faulted in two fatal crashes, a long-awaited government report seen by Reuters has found.
● The flight control system, known as MCAS, was “not an area of emphasis” because Boeing presented it to the FAA as a modification of the jet’s existing speed trim system, with limited range and use, according to the report.
● The 52-page report by the U.S. Department of Transportation’s Office of Inspector General (IG), dated June 29 and set to be made public Wednesday, laid bare mistakes made by both the planemaker and FAA in the development and certification of Boeing’s top-selling aircraft.
 
To sum up, as we know the fact that the 737 MAX has been grounded from commercial flight worldwide since March 2019 after two crashes killed 346 people in Ethiopia and Indonesia over a five-month span, however as this report said, Boeing still kept the FAA in the dark on significant changes to MCAS. Then those “value investors” may inevitably encounter the question: “how can we expect to be kept in the light?”
 
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