Boeing Stock Rises on 737 News, Is It a Good Buy Now?


Nov. 18 2020, Published 9:36 a.m. ET

Boeing stock has been on an uptrend in November. The stock is up 45 percent based on the closing prices on Nov. 17. Boeing stock rose sharply in pre-market on Wednesday, Nov. 18 after it got FAA approval for its 737 MAX fleet. The fleet has been grounded since March 2019. Should you buy Boeing stock or should you sell the news?

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The FAA grounded Boeing’s 737 MAX aircraft in March 2019 after two fatal crashes. The 737 MAX planes that crashed were Lion Air in October 2018 and Ethiopian Airlines in March 2019.  

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Boeing 737 MAX recertification

In addition to the U.S., other countries had also banned Boeing’s 737 MAX. Now, the FAA has approved the model for commercial operations. European countries, that grounded the aircraft before the U.S., are also expected to follow suit and allow the Boeing 737 MAX to resume operations.

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Boeing's stock chart

Looking at Boeing's stock chart, it recently moved above its 50-day and 200-day SMA (simple moving average). Both these SMAs have been a strong resistance line for the stock this year and its convincingly breaking above them signals a short term uptrend. However, its 14-day RSI (relative strength index) of 73 signals that it is overbought in the short term

What is Boeing's stock forecast?

According to the estimates compiled by CNN, Boeing has a median target price of $174, which is a discount of 17.2 percent over the current prices. That said, Wall Street analysts’ target prices tend to lag the price action. Analysts might need to look at Boeing stock again after the news about the 737 MAX and the recent positive news about the Moderna and Pfizer COVID-19 vaccine candidates. Baird raised Boeing's target price on Nov. 18 to $306 and upgraded it to outperform.

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boeing stock price chart
Source: TIKR

Should you buy or sell Boeing stock after the recent spike?

Even after the recent spike, Boeing stock is down over 35 percent for the year. The approval for 737 MAX does clear an overhang for Boeing stock. However, the aviation sector still isn't out of the woods yet.

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Even after there's a COVID-19 vaccine, it will likely take many quarters before the entire world is immunized. Also, the COVID-19 pandemic has left a deep hole in airline companies’ financing. Even after a vaccine is available, it won't be business as usual for airline companies and aircraft manufacturers like Boeing.

Demand for aviation might take a long time to reach the pre-pandemic levels. Zoom Video calls might replace some of the business travel. Also, it remains to be seen how comfortable are people with flying again. 

Is Boeing stock overvalued?

Coming back to whether Boeing stock is a buy or a sell at these prices, given the outlook for the aviation sector, you could consider booking profits in Boeing stock at these levels. From a valuation perspective, the stock appears somewhat overvalued with an NTM EV-to-revenue multiple of 2.07x, which is higher than its historical average.


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