The markets on Monday were taking a breather after a steady run higher in November. Boeing (BA -2.13%), which has soared higher than most during the month, is losing altitude as well. The company traded down as much as 5% on Monday, a rough day for a lot of equities, and closed 2.6% lower.
It's been a tough year for Boeing, with the shares losing nearly three-quarters of their value in March on the one-two punch of continued issues with its 737 MAX and the COVID-19 pandemic's impact on airlines and air travel.
But we've seen positive developments on both fronts in November, and it has helped the shares climb 46% for the month. The 737 MAX has been cleared for takeoff after 20 months on the ground, and positive news on a vaccine has raised hopes that airlines will recover faster than expected.
Monday brought no news to put either of those developments in doubt, but a continued rise in COVID-19 cases and talks of potential lockdowns seem to have taken some of the momentum out of Boeing's shares following the strong run higher.
A report by Baird analyst Peter Arment predicting that November was another month with no 737 deliveries could also be weighing on the shares, serving as a reminder of the challenges Boeing faces to rebuild free cash flow.
Boeing's headed in the right direction, but investors definitely should be cautious here. While all of the company's biggest worries are showing signs of receding, it is going to take a long time to get back to normal.
Even if a COVID-19 vaccine does cause demand for air travel to rebound, airlines are unlikely to feel the full effect until the second half of 2021. Given the carriers took on billions in new debt to survive the crisis, it will likely be years before they are aggressively in the market for new jets again.
The 737 MAX's return to service will allow Boeing to start delivering the 400-plus airframes it built during the grounding, and recoup some of the expenses that led it to burn through nearly $15 billion in the first nine months of the year. But this is not an easy time to place planes.
Southwest Airlines is in talks to try to get some 737s without buyers on the cheap, and reports say Delta Air Lines could be interested, too. That's a reminder to investors that the 737 MAX, once hyped as a potential best-seller, is still damaged goods, and any rebound will take time.
Even after November's gains, Boeing's shares are still down more than 50% since the MAX was grounded. Investors buying in, hoping to see the stock price rebound with the plane's return, should be warned they are likely in for a long wait.