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Why Boeing Stock Is Up Today

By Lou Whiteman – Sep 29, 2021 at 2:13PM

Key Points

  • Boeing shares have been beaten down for several years, first due to issues with the 737 Max, and then due to the pandemic.
  • The stock got an upgrade on Wednesday based on the theory that the worst of the pandemic's impact on passenger airlines is now behind us.
  • The company is also making progress toward winning approval for the 737 Max to fly in China again.

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Wall Street is celebrating an analyst's upgrade of the aerospace giant, as well as good news out of China.

What happened

Boeing (BA 1.81%) got good news out of China and an upgrade from Wall Street on Wednesday. The stock gained altitude as a result, and was up by about 5% as of midday.

So what

Boeing has flown through a lot of turbulence in recent years -- some of it of the company's own making. The 737 Max, which at one point was thought to have the potential to become the best-selling passenger plane of all time, was grounded for nearly 18 months after a pair of fatal crashes. By the time the issues that led to those accidents were addressed and the jets were cleared by regulators to fly again, the pandemic had tanked air travel passenger volumes and airline revenues, leading to lower demand for new aircraft.

A Boeing 737 Max in flight.

Image source: Boeing.

But on Wednesday, the head of Boeing's China operations told Reuters that a 737 Max test flight for Chinese regulators last month had been a success, raising hopes that China's ban of the plane will be lifted before year's end. China is the largest market that has yet to recertify the 737 Max to operate.

Bernstein analyst Douglas Harned also chimed in, asserting that the worst is over for the airlines. Harned upgraded Boeing, along with rival Airbus (EADSY 2.45%) and supplier Spirit AeroSystems (SPR 3.54%), saying that while the Boeing story is "not totally clean," we've finally hit the inflection point for global travel and capacity trends look promising.

Now what

Boeing is indeed airborne again, but investors should keep their seat belts fastened. Airlines are seeing trends moving in the right direction, but the carriers right now are more focused on rebuilding their balance sheets and less interested in buying new airplanes. Most large orders for new jets announced this year have come at major discounts.

I believe it will be a while before Boeing has pricing power again, especially with its traditionally more lucrative widebody international airframes. While the worst may be over for the 737 Max, Boeing is still fighting pesky design problems with its 787 Dreamliner, and the introduction of the next version of its 777 has been delayed.

Boeing stock has slowly recovered from the lows it touched early in the pandemic. The share price can climb further from here, but it might be a long time before it really takes off again.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Boeing Stock Quote
$174.94 (1.81%) $3.11
Spirit AeroSystems Holdings Stock Quote
Spirit AeroSystems Holdings
$25.42 (3.54%) $0.87
Airbus Stock Quote
$28.27 (2.45%) $0.68

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