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What’s the latest on Boeing’s share price amid the coronavirus outbreak?

US aerospace giant Boeing Company saw its share price drop to a 2.5-year low on Thursday 06 March.

Source: Bloomberg

Boeing’s share price at a 2.5-year low

US aircraft manufacturer Boeing Company's share price is hovering at a 2.5-year low.

On Thursday 05 March, the company saw its share price drop by 8.02% (against Wednesday’s close) to finish the day at US$260.37 a share, a level it has not seen since November 2017.

This is one of the largest weekly share price declines in the company’s recent history, and appears to be a continuation of last week’s coronavirus-driven downward momentum.

The aviation firm erased nearly 13.5% in market value for the week ending 28 February. Stocks had opened the week just above US$317 per share, before closing at US$275.11.

Boeing’s European rival Airbus also was also affected by the worsening coronavirus outbreak and growing investor concerns. Airbus lost 11.26% of its share value between 24 and 28 February.

Aerospace was not the only US sector affected by this most recent wave of sell-off, based on US market data. The S&P 500, which tracks the stock performances of 500 large-cap firms listed on US stock exchanges – including Boeing, experienced its biggest one-day decline on record, as it sunk 4.42% on Thursday 27 February.

The index also recorded its fastest market correction ever – outdoing even the 2009 financial crisis and 1929 Great Depression – losing 12% in just six days. A market correction is when stock values decline by between 10% and 20%.

The Dow Jones Industrial Average also closed 1162 points lower on 27 February, with the benchmark down more than 3100 points in the same week.

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Why one analyst thinks there is an ‘opportunity’ for Boeing

While Boeing continues to be hampered by the global grounding and suspension of its 737 MAX fleet, this latest share price depreciation is mostly tied into COVID-19’s impact on market sentiment everywhere, according to Aerospace Forum founder and aviation analyst Dhierin Bechai.

‘The entire market has been selling off and gaining as news about COVID-19 was either positive or negative,’ he wrote in an analysis for Seeking Alpha.

Still, he is of the opinion that there is an ‘opportunity’ for the stock even amid the present risk-off market.

‘The opportunity lies in the fact that the sell-off in Boeing shares is not triggered by the Boeing 737 MAX, but by a market-wide sell off which has hit travel names and subsequently jet makers’, he wrote.

He explained that with the market currently refusing to fully factor in the 737 MAX problems, Boeing’s stocks have the potential to do ‘quite well’, if and when the market recovers.

‘So, if the market reacts positively to COVID-19 news and as a result want to put the markets in the green easily, buying shares in Boeing, which is trading 35% off its high but still has the highest component weight, makes some sense,’ he added.

Out of 23 investment brokers polled by FactSet at the start of March, 13 have rated the stock a ‘hold’ and seven have rated it a ‘buy’.

737 MAX’s ongoing impact on the Boeing share price

That is not to say that the 737 MAX grounding has no part to play in Boeing’s recent fortunes. Share price is down 21.9% year-to-date.

Analysts had previously stated that the ongoing suspensions could cost Boeing up to US$20 billion by June 2020 in lost revenue and compensation to airlines and victim families. Every passing month of stagnation would only incur more costs.

The company hinted in January 2020 that the earliest possible approval date would likely be in June this year. It had also halted production on the model.

Boeing CEO: we made a ‘fatal mistake’ in the design of 737 MAX

In a recent interview with The New York Times, new CEO David L. Calhoun acknowledged that there were more problems within the airline than he had ‘imagined it would be…and it speaks to the weaknesses of our leadership’.

He also admitted that the company made a ‘fatal mistake’ when designing the 737 MAX, as it had overestimated the software troubleshooting abilities of pilots ‘in places where pilots don’t have anywhere near the experience that they have here in the US’.

Calhoun also criticised his predecessor Dennis A. Muilenburg for putting stock market ambitions ahead of supply chain capabilities. He accused Muilenburg for ramping up production numbers prematurely.

‘I’ll never be able to judge what motivated Dennis, whether it was a stock price that was going to continue to go up and up, or whether it was just beating the other guy to the next rate increase,’ he told The Times.

‘If anybody ran over the rainbow for the pot of gold on stock, it would have been him,’ he added.

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