What happened

Shares of Boeing (NYSE:BA) gained 40% last week on growing investor optimism that the airline sector is in the early stages of a recovery. The momentum continued on Monday, with Boeing up 12% as of 11:30 a.m. EDT today after two Wall Street banks predicted the stock will continue higher.

So what

Boeing shares have traded with the sort of volatility usually reserved for penny stocks so far in 2020, losing more than half their value in March but storming higher in recent sessions. COVID-19 is responsible for the downward pressure, with the pandemic starving airlines of revenue and forcing them to modify expansion plans.

Travelers are beginning to return, and airlines as a result are starting to rebuild their pre-pandemic flight schedules. We are still in the early days of a recovery, but investors are increasingly hopeful the worst of the pandemic is now behind us, and that's causing shares of beaten-down companies like Boeing to rally higher.

A Boeing 787 Dreamline takes off.

Image source: Boeing.

Boeing shares got a boost Monday from Seaport Global, which initiated coverage of the company with a buy. Analyst Richard Safran said he agrees with investor sentiment that conditions are improving and argues that historically, Boeing has outperformed other industrials early in a recovery.

Goldman Sachs, meanwhile, reiterated its buy on the shares, and analyst Noah Poponak raised his price target for the stock to $238 from $209. Poponak's analysis of airlines and leasing companies found that customers have only revised 2020 and 2021 delivery plans by about 17%, a number well below announced production cuts and far less than the market seems to believe.

Now what

Even with the gains, Boeing shares are still down nearly 30% year to date. That seems appropriate: Even if we are heading in the right direction, it is going to take a significant amount of time to get back to normal.

Boeing suspended its dividend and is cutting its workforce because it does not expect air traffic to recover for years. The company also raised $25 billion in debt to help weather the storm, all but eliminating concerns about its future, but management clearly sees a difficult path ahead.

Investors buying in today should be mindful of Boeing's caution. Even if we are in the early stages of a recovery, airlines are likely to lean heavily on existing fleets and not commit to buying new jets, while they refresh their balance sheets. And that is likely to benefit other companies besides Boeing in the near term.

The worst might be over, but there are still better aerospace investments today than Boeing.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.