Right now appears to be an advantageous entry point into Boeing (NYSE:BA) stock. The recent rally in Boeing stock has broken through all resistance levels, indicating that this stock is bound to set new highs. Many of the recent developments that created the rally still ring true regarding Boeing's projected growth for the long-term. Investors that are interested in a long-term investment will benefit from buying into Boeing as the stock pulls back from profit takers.
Those looking for a low point of entry should vigilantly watch Boeing stock as its volatility may increase after surpassing its highest resistance level, moving closer to its 52-week high. Indicators project a fair target of around $85 per share for Boeing. It's currently trading at over $91/share following another impressive earnings report.
Boeing's first quarter 2013 earnings release exceeded analysts' estimates by over 17 percent and showed a year-over-year increase of 24 percent as well. Boeing was able to achieve this by improving productivity and operating margins. Boeing's increased 737 and 777 deliveries were a major proponent for revenues outperforming expectations. The setback with the 787 series offset some of these gains. Boeing was able to improve operating margin by 150 basis points by improving deliveries and lowering R&D expenses. The earnings report also showed that Boeing is on track for its 2012 guidance, despite setbacks with the battery system for the 787.
Better yet, the FAA recently approved the new battery for Boeing's revolutionary 787 Dreamliner. Once the new and improved battery is finished, and the FAA lifts the current ban, Boeing stock could see a significant uptick during the current quarter. Nippon Airways, the largest 787 client, is already planning at least 100 test flights in May so there should be plenty of news to follow that will further spur buying activity in Boeing. Developments regarding the integration of the 787 series or meeting the delivery guidance for 2013 certainly may drive Boeing's stock up as well. There was also an announcement in April that Boeing was awarded a $1.8 billion three-year contract with South Korea that starts in 2016.
Aside from the latest developments, reviewing the recent market activity will provide additional insight to support this assessment. All indications from the market suggest that Boeing's recent rally will subside almost immediately with the beginning of May 2013. On the last Friday of April 2013, Boeing stock closed at less than a dollar under its 52-week high of $93.38. The stock has had an average daily volume of over 5.5 million shares for the past six months. The two biggest days for Boeing was 1/8/13 and 1/16/13, both days trading volume exceeded 20 million shares.
Around 86 percent of the time, this stock moves less than 2.2 percent each day. However, the stock's price has increased significantly since trading for under $75 per share on the last day of 2012. Some may argue that the opportunity with Boeing has passed. However, sellers in the market should create opportunity for new longs to turn a comparable return again by fall of 2013. The recent rally for Boeing stock was strong, indicating that the stock is possibly overbought right now and could eventually turn sideways.
The more perceived need for international investment in aerospace and defense, the better Boeing will continue to do throughout the year. Over 40 percent of the $68 billion Boeing's Defense Space and Security segment generates can be accredited to international clients. Boeing was recently awarded a total of $4 billion for 27 commercial planes - 17 of these are from the 737 series.
Earnings for the aerospace sector have already increased by 6.8 percent in 2013, compared to a 4.5 percent decline in 2012. Boeing will make most of its domestic defense revenue from the Overseas Contingency Operations. Fortunately, the OCO is outside the scope of the predetermined defense budget cuts. Growing international demands and potential bolt-on acquisitions bode well for Boeing's outlook in 2013.
Boeing also pays a small dividend which provides a 2% return on a long-term hold in addition to any gains in the stock. Rather than buy the stock outright, I like selling forward weekly puts for .40-1.00 per contract. Focus on out of the money, currently the $90 strike puts. This will provide immediate returns on any potential position. If you get put in roll to selling calls against the shares above the strike of your exercised puts.
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.