Boeing's Booming Orders And Bullish Momentum
Things are on the up for the aerospace giant.
Boeing really has taken off. And there are lots of reasons why. The stock price is up nearly 40% since this quarter began, a complete turnaround from the previous one.
Just this week, Lufthansa announced it’s buying 100 MAX jets from Boeing. This adds to the long list of companies placing orders for more. The aircraft manufacturer is on track to deliver 520 jets by the end of this year. But there is a backlog of about 5,300 aircraft, which includes 4,000 just for the popular 737 model. Boeing’s most productive year was the 800 deliveries in 2018.
Alongside an influx of orders, Boeing’s stock has been boosted by a handful of analyst upgrades.
BofA was the most recent upgrade, citing, “We continue to expect Boeing to generate $15 free cash flow per share by 2026. We raise our price target to reflect a cyclicals’ rerating as the market prices an easing interest rates environment.”
Deutsche Bank analyst Scott Deuschle upgraded Boeing’s rating from Hold (i.e. Neutral) to Buy and bumped his price target to $320. The average price target has risen about $15 over the past month to $266.39 from about $250.
With the current stock price at $260, it’s not far off the average target. Does that mean there are no opportunities here? Not necessarily. While it’s possible that Boeing could take a breather in the near term, given the overbought RSI levels (79), we think it’s equally possible that it continues to grind higher as industrial investors position for good 2024 stories.
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Cyclical industries are those that are economically sensitive. This means they follow the ups and downs of the economy as a whole – becoming profitable during periods of prosperity and inactive during downturns. They also come with a lot more volatility.
They are an opportunity for 2024 as recession risks fade.
Cyclical stocks are seen as more volatile than noncyclical or defensive stocks, which tend to be more stable during periods of economic weakness. However, they offer greater potential for growth because they tend to outperform the market during periods of economic strength.
Beta value or systemic risk is higher for these names. They tend to have high beta values, usually higher than 1. A beta of 1.5 means if the market falls 10 per cent, the stock is likely to fall 15 per cent.
In the rest of this article, we look into:
The China approval for Boeing
How we’re positioning into the stock
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