What happened
With a miserable third quarter, and September in particular, now behind us, Wall Street is in an upbeat mood on the first day of the fourth quarter. Shares of Boeing (BA +1.24%), which have trailed the broader market in recent months, were particularly strong on Monday, up more than 5% on a day when investors are shopping for potential bargains.
So what
Following a September in which the S&P 500 fell more than 9%, investors seemed quite pleased to see the calendar turn to October. As selling intensifies, there are often stocks that become oversold, and Monday's rally appears to be a case of investors trying to find attractive opportunities following the downturn.
They are also reacting to news out of the United Kingdom that a controversial tax plan that critics said could lead that economy into a recession was being reworked.
Boeing shares have been hit particularly hard in recent months. The stock is down more than 20% since the beginning of August, nearly twice the decline of the broader index, despite no significant unexpected bad news. In fact, Boeing announced a number of new jet orders during the period, a sign that demand is holding up.
It can be argued that Boeing's sell-off had more to do with sentiment than fundamentals. The company does best in a thriving economy, when airlines are flush with cash and see growing demand for travel and are therefore willing to commit to massive new orders. The threat of a Federal Reserve-induced recession has weighed heavily on the airlines and key suppliers like Boeing.
So it should come as no surprise that on a day when the markets are collectively seeing the glass as half full, and not half empty, Boeing would lead the way higher.
NYSE: BA
Key Data Points
Now what
These are frustrating times to be a long-term investor. For those thinking in terms of years, and not quarters, there is a solid bull case to be made for Boeing. The company is one half of a global duopoly in an industry that is expected to grow at an annual rate of 4% for the next two decades. It has orders for more than 4,000 aircraft on its books, which will provide billions in cash flow in the years to come.
But in the near term, there is a lot of uncertainty. Airlines often have options to defer orders when times are tough. To survive the pandemic crisis, Boeing's debt ballooned by more than 400%, and the company needs the cash from new deliveries to come in sooner, rather than later, if it is to rebuild its balance sheet and normalize operations.
It all adds up to volatility, and a stock that trades more with overall market sentiment than it does with company specifics. For Boeing shareholders, the best advice is to buckle up and be prepared for continued turbulence.
