What happened
Shares of Boeing (BA -0.24%) rose 4.5% by midday today as investors took a positive view of the company's future. It's part of a general up day for the commercial aerospace sector and a good day for the markets.
So what
One day's trading isn't even a swallow, let alone a summer. However, it might alert investors to the potential upside in the stock. There's no doubt that Boeing has had, and continues to have, a lot of issues.
Only the other day, CEO Dave Calhoun confirmed that its supply chain issues would extend at least until the end of 2023. These issues are part of the reason Boeing is struggling to ramp up production of its narrow-body workhorse of the skies, the 737 MAX. That's the last thing the company needs as its rival, Airbus (EADSY), has stolen a march on the company due to the former grounding of the 737 MAX.
Moreover, the Federal Aviation Administration has halted deliveries of the wide-body 787. Cost overruns on high-profile programs, including the KC-46 tanker and Air Force One, have damaged the company's reputation. The first delivery of the wide-body 777X aircraft is now expected in 2025 compared to an original estimate of 2020.
That said, there's still a case for buying Boeing stock, based on two ideas. First, the commercial aviation industry is firmly in recovery mode, and Boeing remains one of only two major players in its industry (and Airbus is similarly struggling to ramp up production). Second, Boeing's valuation has gotten so low that it's now become a valuation play.
Now what
Today's move is welcome, and highlights the stock's potential. However, what Boeing really needs to do is stop the ongoing flow of bad news from the company. If management can execute better, the stock has significant upside, and today's move helps highlight that fact.
