Boeing Gone Bad

| About: The Boeing (BA)

On January 16, 2013 Boeing (BA) stock had dipped almost 4% by mid-day. The dip can be attributed to an announcement by the Federal Aviation Administration about the pending investigation of Boeing's 787 aircraft. The planes have come under scrutiny after several safety hazards have made themselves evident.

While flying in an airplane might still be the safest method of transportation, buying Boeing stock will not be a safe bet until the investigation is concluded. If you are long right now, it is advisable to sell; instances of cracked windshields and flaming battery components have prompted the investigation into Boeing, and no one knows what will come to light after the Feds conclude their report.

The airline's latest offering has encountered several issues, a rarity for the blue-chip airplane supplier. On January 7, 2013 a Japan Airlines Boeing 787 could not take off because of a fire in its lithium-ion battery compartment. On January 16, 2013 the two largest Japanese airlines grounded two dozen new 787's after one pilot saw a warning indicator and smelled smoke. Amid these incidents, the FAA released a report that proved that lithium-ion batteries are highly flammable and can ignite during air transport.

All of this bodes badly for Boeing, who has equipped its fleet of 787's exclusively with lithium-ion batteries. The company may have just produced a large crop of airplanes which won't be able to fly; the investigation may prove that Boeing 787's are not safe. If that turns out to be the case, Boeing's earnings, as well as their stock, will tank. Best to get out now and wait for this to blow over.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Tagged: , Aerospace/Defense Products & Services
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