Is it safe for investors to fly with The Boeing Company (BA)?

The Boeing Company (BA) was the most accumulated stock last week by a wide margin according to our proprietary accumulation/distribution model. Wall Street gobbled up a net $1.46 billion of the beleaguered airplane maker. Genius Brands International, Inc. (GNUS) was the runner up at $755 million.

BA started last week at $145.45 and ended the week at $205.43, an amazing 41.22% lift. The run continued at the start of this week with the DOW member hitting an intraday high of $234.20 and finishing Monday’s normal trading session at $230.50.

That’s quite a move, considering the company delivered just four planes, yes four, in May and only six in April. Meanwhile, 18 orders were cancelled last month. (1) The Durable Goods Orders report is just flat nasty for aircraft and parts. Nondefense aircraft shipments are down 35.7% compared to last year and new orders down 119.9%. Even Defense aircraft fell 12.1% and 14%, for shipment and new orders, respectively. (2)

The coronacrash for airplane demand comes on the heels of the 737 MAX debacle. It’s hard to imagine things can get much worse for Boeing.

On the plus side, management will try to recertify the 737 MAX by the end of June, (3) although recertification might not be enough to overcome the PR disaster associated with the brand. Only 50% of readers who responded to the poll believe the 737 MAX will survive the COVID-19 crisis. (4) A poll done by Bank of America found that two-thirds will wait “at least six months before flying or never fly it, while most respondents said they would switch to another aircraft if they had the opportunity.” (5) Both results are not confidence builders.

Unlike respondents, Wall Street expects BA to fly high in 2021 with consensus sales and earnings per share (EPS) estimates of $88.56 billion and $6.81, respectively.  The revenue target is above 2019’s $76.56 billion and would be the fifth highest amount in the last decade.

For the last five-years, the plane maker traded at an average of 1.58 times sales (P/S). If BA hit the street’s 2021 topline number and traded at its five-year average P/S ratio, then the stock price would be $247.95.

Sliding down the income statement to the bottom line, investors paid an average of 44.73 times Boeing’s earnings per share since 2015. Again, using next year’s consensus EPS number of $6.81 and the five-year average P/E, we arrive at a potential price target of $304.61, which would be roughly 50% higher than where the stock is as we type, $203.41.

Shorter-term, if BA closes below $200, our analysis of its stock chart suggests shares could drop to $180ish. If the technical safety net at $180 fails to hold, $160 might be next on the itinerary. After that, the rising 50-day moving average would likely quell selling and attract buyers.

Outlook: It’s likely to be a bumpy ride for The Boeing Company (BA) shareholders as the company works through terrible market conditions for the industry and overcoming the public’s negative view on the 737 MAX. Investors considering adding the plane manufacturer might wait to see if they can get a better entry point than current levels, thereby increasing the potential reward, offsetting some of the heightened risk of owing BA versus other economically sensitive stocks.