Boeing Stock Up 4% Today – Time to Buy BA Stock?

The price of Boeing stock is jumping 4.3% in pre-market stock trading action this morning at $196.3 per share following news that the Civil Aviation Administration of China (CAAC) issued the first directive concerning the return of the 737 Max to the country’s airspace.

According to a report from Reuters, the directive indicates the steps that need to be taken by operators to be able to fly the MAX again. However, it does not indicate when or if the country is already willing to lift the ban it imposed on the model since March 2019 amid safety concerns.

“The CAAC’s decision is an important milestone toward safely returning the 737 MAX to service in China” Boeing said on Thursday.

Nearly a third of Boeing’s undelivered 737 MAX are destined to Chinese customers who are awaiting the CAAC’s green light to incorporate these vessels into their fleets.

The combined value of these planes could surpass the $40 billion mark based on Boeing’s listed prices for the MAX.

What can be expected from this aircraft manufacturer following this important development? In this article, I’ll take a closer look at BA stock’s price action and fundamentals to outline plausible scenarios for the future.

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Boeing Stock – Technical Analysis

In a previous article about Boeing, I stated that a break above the 200-day moving average would favor a bullish outlook for the stock on the back of the positive news that were coming out of the Dubai Air Show.

However, the opposite happened and that was also a scenario we contemplated back then. The rejection of this important marker ended up pushing the price of BA stock 19% lower on the days that followed.

Also, the appearance of the Omicron variant of the COVID-19 virus may have contributed to a decline in Boeing’s share price as market participants have voiced their concerns about how it could affect the performance of the business if airlines experience another temporary downturn.

Moreover, Boeing was recently excluded from a bid to manufacture 88 fighter jets for the Canadian government – a contract that was worth at least $15 billion.

Even though today’s news from China are encouraging, it could still be a while before the company can deliver its grounded 737 MAX models to Chinese operators.

For now, the outlook for Boeing remains bearish based on yesterday’s break below the descending price channel shown in the chart and overly bearish momentum readings.

In this regard, the Relative Strength Index (RSI) is standing at 27 and just entered oversold levels for the second time in roughly a month while the MACD has moved to negative territory. This move is being accompanied by steadily increasing negative histogram readings.

If shares continue to decline, it seems plausible to expect that the November price gap will be the next support to watch. This results in a total downside risk of 15% based on yesterday’s closing price of $188 per share.

Boeing Stock – Fundamental Analysis

The potentially disruptive nature of the Omicron variant is perhaps one of the most worrying factors that could affect the performance of Boeing from a financial standpoint.

In this regard, any indications that airlines will suffer another hit amid government-imposed travel restrictions could plunge the price of BA stock and depress the firm’s top-line forecasts for the following quarters.

At the moment, analysts are expecting that Boeing’s sales will jump back to pre-pandemic levels next year. Therefore, any signals that the Omicron variant may hurt the company’s top-line performance will likely result in a deterioration in its share price.

Boeing is currently displaying a forward P/E ratio of 52x. This valuation metrics seems fair based on the company’s forecasted earnings growth but it is also pricing a blue-sky scenario for the firm in which no further virus-related disruptions occur.

All things considered, the price of Boeing stock remains highly sensitive to different types of setbacks while its business is not in the best shape considering the large debt it had to take in to survive the pandemic.

With this in mind, those who would like to take a long position in this airline stock should perhaps wait until the margin of safety is higher. Right now, the technical factors are pointing to weakness in the price action and further news about Omicron could contribute to plunging the price to a point that makes Boeing stock more attractive from a fundamental standpoint.

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