What happened
Shares of aerospace giant Boeing (BA -0.76%) rose in Wednesday trading and are up 3.5% as of 1:55 p.m. ET.
You can thank investment banker R.W. Baird for that.
Image source: Getty Images.
So what
Already bullish on Boeing with a buy rating on the stock, Baird has elevated Boeing stock to its list of "fresh picks," reports StreetInsider.com today.
Baird credited expectations that China will resume buying Boeing 737 MAX airplanes for its optimism:
Whether it's late 1Q22 or early 2Q22, the delivery timing does not matter as long as it does not impact BA's [plans to produce 31 or more Boeing 737s per month]. Our recent checks on China flight activity continue to confirm that delivery activity is picking up with Shanghai Airlines close to receiving the first 737-MAX in three years. China Southern and Air China have had test flights this month as well and Shandong, Shenzhen and Donghai Airlines having test flights in February as well.
In short, all indications suggest widespread deliveries of Boeing 737s to multiple Chinese airlines could begin "within a few weeks," and Baird expects this to be "a major positive step for BA and the 737-MAX program."
Now what
Now mind you, not all the news out of China is so good. In particular, Reuters reported yesterday that new cases of COVID-19 hit a new high in China -- more than 3,500 cases reported on Monday -- and CBS reports "daily cases jumping about 14% in the last few days."
As quarantines start to slam into place across China, Baird cautions that "domestic China traffic has dropped by 47% from 11,000 flights per day to 5,800 in the past 3 weeks," according to StreetInsider. If this trend continues, it could decrease demand for air travel -- and for airplanes -- potentially slowing the deployment of any Boeing 737s to the Middle Kingdom. That being said, Baird hopes that "this [is only] a temporary slowdown as Omicron cases increase and Chinese authorities implement a zero tolerance policy with lockdowns involving 37 million people."
Long-term, Baird is probably right about that, as the coronavirus pandemic continues to morph into a less fatal endemic disease. Investors shouldn't let COVID-19 spoil today's good news for Boeing stock -- and with Boeing stock on the rise today, it appears they don't intend to.
