Shares of Boeing (NYSE:BA) traded up nearly 5% on Monday on encouraging developments in the battle against COVID-19. Over the weekend, the Food and Drug Administration authorized a new treatment for hospitalized patients, and reports surfaced that President Donald Trump could push to green-light a vaccine as soon as this fall.
A quicker-than-expected end to the pandemic would be good news for beaten-down airlines, which in turn would be good news for Boeing. That's good enough to get the shares jumping higher on Monday. As of 1 p.m. EDT, shares were up 4.75%.
Boeing shares have lost nearly half of their value year to date, as the aerospace giant has had to deal with a wave of order cancellations and deferrals due to the coronavirus. Airlines have seen travel demand fall by 70% or more year over year; as a result, they need fewer planes now than they did just a few months ago.
Travel demand is likely to remain sluggish for as long as the pandemic is front and center, and possibly for a lot longer. I worry it could be the second half of the decade before Boeing deliveries rebound, and the stock is unlikely to regain lost altitude until that happens.
Boeing's prospects would improve with any development that would shorten the staying power of COVID-19 and get travelers back in the skies sooner. The authorization of a new treatment, coupled with talk we could be closer to a vaccine than assumed, caused investors to bid up Boeing shares in anticipation.
There is a lot of reason for caution here. For one, there is still a lot of uncertainty surrounding COVID-19 treatments and vaccines. We're a long way from knowing what will work, and even if there is a vaccine approved by October, it will take months to distribute it and for society to start to normalize.
Even if all goes well, Boeing's airline customers are saddled with billions in new debt taken on during the pandemic and likely will be cautious about committing to costly new planes. Even prior to COVID-19, the company had problems including its troubled 737 MAX, cultural issues that were surfaced by the MAX issues, and a product portfolio that doesn't match up well to what airlines are likely to demand.
Despite Monday's positive headlines, I'd advise caution when it comes to Boeing shares.