Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Boeing Are Falling Today

By Lou Whiteman - Mar 18, 2020 at 10:22AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With aircraft demand cratering, the company turns to Washington for help.

What happened

Shares of Boeing (BA 5.64%) continued their downward spiral on Wednesday, trading down more than 19% at the opening. The company faces serious questions about its liquidity and demand for new commercial aircraft, and investors are running for the exits.

So what

Boeing was battling turbulence well before the COVID-19 coronavirus pandemic -- fighting to restore investor and airline confidence following the March 2019 grounding of its 737 MAX airplane. The company's outlook has grown worse as the outbreak has spread as global airlines are scrambling to trim schedules and cut costs, which includes grounding aircraft and deferring new orders.

The situation has led Boeing to seek U.S. government assistance; the company is seeking at least $60 billion in aid for itself and its suppliers. Boeing said it would use any liquidity support to make payments to suppliers to maintain the health of its supply chain for the time when demand returns.

Artist rendering of Boeing 787 Dreamliners and 777 aircraft flying in formation.

Boeing's commercial twin-aisle family of jets. Image source: Boeing.

"The long term outlook for the industry is still strong, but until global passenger traffic resumes to normal levels, these measures are needed to manage the pressure on the aviation sector and the economy as a whole," Boeing said in a statement.

The company recently drew down $13.8 billion in loans to support its liquidity but is clearly worried about a prolonged downturn in new jet sales. The aid request follows a similar request from the airlines for about $50 billion in assistance and other calls for help by the hotel industry and other travel businesses.

But the request for help couldn't come at a worse time for Boeing, which has been trying to rebound from a year full of embarrassing revelations about its culture and accusations that it put profits ahead of safety when developing the 737 MAX.

Now what

On Sunday, I wrote that despite Boeing shares being down 50% year to date, I still wouldn't buy in. That's hard to believe, but just three days later, the stock is down another 39%. Boeing shares have now lost nearly 70% of their value in 2020.

The company today trades at less than 0.8 times sales, but sales are likely to be trending down in 2020. The stock is, without doubt, cheaper today than it has been in a long time. But absent some clarity as to the extent of the issues the company is facing and a better idea of what new aircraft demand is going to look like over the next few years, I'd avoid buying these shares, even if they keep falling.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

The Boeing Company Stock Quote
The Boeing Company
BA
$141.53 (5.64%) $7.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
321%
 
S&P 500 Returns
111%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.