Please ensure Javascript is enabled for purposes of website accessibility

Dow Jones Up 400 Points as Boeing Stock Soars, Apple's App Store Sees Sustained Demand

By Timothy Green - Jun 3, 2020 at 1:37PM

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

A possible activist stake in Boeing lit a fire under the stock, and an analyst sees the App Store helping to drive services growth for Apple.

The Dow Jones Industrial Average (^DJI 0.45%) was up again on Wednesday, despite a backdrop of a continuing pandemic, elevated unemployment, and widespread civil unrest in major U.S. cities. The Dow was up about 1.5% at 1:20 p.m. EDT.

Boeing (BA 0.28%) was the Dow's star performer, soaring after rumors emerged that an activist investor has taken a major stake. Meanwhile, Apple (AAPL 0.63%) stock was treading water even after a price-target boost from an analyst.

Boeing soars on activist-investor rumors

Shares of airplane manufacturer and defense company Boeing were up about 9.7% by early afternoon Wednesday following a rumor that hedge fund Third Point had taken a significant stake. Boeing stock has been hammered over the past few months as the pandemic decimated demand for air travel and upended the airline industry.

A plane flying in the clouds.

Image source: Getty Images.

While shares of Boeing are down about 57% from their 52-week high, the stock has nearly doubled since bottoming out in March. If the rumors are true, Third Point likely believes that the stock could continue to rally.

The problems facing Boeing are immense. Prior to the pandemic, the grounding of the 737 Max following two fatal crashes did a number on Boeing's financials. The situation has only gotten worse now that airlines are fighting to survive the pandemic-driven slump in demand. In the first quarter of this year, Boeing delivered just 50 commercial airplanes, down 66%. Free cash flow was a loss of $4.7 billion.

Boeing recently raised $25 billion by selling new debt and is working to slash costs. The company reportedly began involuntary layoffs late last month, affecting nearly 7,000 employees, and production is being slashed for certain planes.

It may take years for the airline industry and Boeing to fully recover, and Boeing will likely emerge from this crisis weighed down by additional debt. The stock could certainly bounce back more quickly than that, but patience will be required for anyone looking to invest in this industrial giant.

Apple upgraded on App Store strength

While the iPhone is the most important source of revenue for Apple, the App Store helps drive growth in the company's fast-growing services business. Morgan Stanley estimates that App Store revenue has jumped 35% on a year-over-year basis for the first two months of Apple's current quarter, a good enough performance to prompt a price-target bump.

Morgan Stanley raised its price target on Apple stock from $326 to $340, saying that high levels of engagement that drove App Store spending during the worst of the pandemic have persisted. The investment bank expects App Store revenue to rise 32% in Apple's current quarter, even factoring in an expected slowdown in June. This growth will drive 16.7% growth in the broader services segment, according to Morgan Stanley's estimates.

This App Store momentum is expected to continue past the current quarter, with Morgan Stanley predicting that higher App Store growth rates will help drive a 16.9% rise in services revenue for fiscal 2020 and a 17.8% rise in services revenue for fiscal 2021.

Shares of Apple were up about 0.1% by early Wednesday afternoon. The stock is just a few dollars below its 52-week high.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool has a disclosure policy.

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

Apple Inc. Stock Quote
Apple Inc.
$173.19 (0.63%) $1.09
The Boeing Company Stock Quote
The Boeing Company
$170.47 (0.28%) $0.48
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$33,912.44 (0.45%) $151.39

*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
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/16/2022.

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.