Little has come easy for Boeing (BA 0.25%) over the past five years, as the aerospace giant has weathered both engineering woes and the impact of the pandemic. But investors are seeing signs that suggest the worst is now behind Boeing, sending shares up 24% in November, according to data provided by S&P Global Market Intelligence.
Boeing's biggest headwinds appear to be fading
Boeing hasn't given investors much to get excited about in recent years. Its 737 MAX, an aircraft that was once hyped for its potential to be the best-selling airframe in history, was grounded for 18 months after a pair of fatal accidents that led to a redesign. Before the MAX could get flying again, the pandemic caused airlines to scale back orders, cutting into Boeing cash flow.
The aerospace giant has also experienced setbacks in its defense arm, and in commercial designs, including its 777X wide-body jet.
But there is growing evidence that the worst is now over. Boeing enjoyed a strong showing at the Dubai Air Show, including a massive new 777X order from Emirates that should help reassure investors about the viability of the design. The company also reported progress in winning certification of the 737 MAX 10, and an acceleration of deliveries of other aircraft.
There are also indications that China, the world's most important aviation market, might be willing to allow the MAX to fly over its skies again soon.
Wall Street is taking notice. Deutsche Bank upgraded Boeing to a buy mid-month on stronger deliveries, which should help boost free cash flow. RBC Capital followed with an upgrade to outperform soon after.
Is Boeing a buy after a strong November?
Boeing is moving in the right direction, but the company still has a long way to go. The aerospace giant nearly quadrupled its debt total to survive the pandemic and will need years of deliveries to pay down that debt and normalize its balance sheet. It is also still working through issues with Spirit AeroSystems, a former subsidiary that remains a key supplier. There is also some risk that the economy will turn before Boeing gets its assembly lines up and running to their full potential, which could lead to order deferrals and cancellations at an inopportune moment.
Shares of Boeing have nearly doubled from their pandemic-era lows but remain about 50% below where they were prior to the initial 737 MAX crashes. Given how long it will take to get operations back to pre-pandemic norms, that valuation seems about right, and Boeing does not read as a huge bargain for investors right now.
For those with patience, Boeing likely goes higher from here. But investors interested in buying in should fasten their seatbelts and prepare for a long journey.
