Boeing's Dreamliner: Still Grounded But Its Stock Could Soar

Technical complications, worker strikes, and everything in between has at one point or another hampered Boeing's (BA) ability to deliver its much-delayed 787 Dreamliner aircraft. The stock took an almost 7% dive Tuesday, adding to a 40% drop in the last year and a 50% drop since October of 2007, when the announcement of the first 787 delay for the aircraft company was made.

Investor patience is being tested to the limits with Boeing as it is in a sharp fight with rival Airbus for future contracts in an industry marred with carriers in serious financial trouble, given the latest economic fallout and fluctuations in energy prices. Boeing has historically seen several missteps as it works on its revolutionary, next generation plane and what had been seen as a sales boom for the company is now once again stalled at the factory.

The aircraft is an industry first for many reasons, from its 250-seat advanced interior to its exterior made entirely of composite materials. Boeing was confident in its ability to deliver the aircraft in the first half of next year to its customers, however, delaying the first flight indefinitely due to newly-found exterior stresses will likely push dates back by months. This news did not please investors in Tuesday's trading session, sending shares lower by $3.

What's in store for Boeing's stock? The March lows of around $30 will still be the complete floor of support, unless the general economic footprint fails further, so any pullback into the low $40s is attractive for this large-cap with a nearly 4% dividend yield. Remember, this stock was in the $80s a year ago, despite having already delayed the 787 several other times. So when that first flight and initial delivery take place next year, those will be catalysts that provide the company with two major milestones to appease investors.

Aircraft has been in the news recently for the most tragic of events, as the investigation into the Air France Airbus crash continues, but precisely when the mood is most distraught around an industry, is the time some attractive valuations can be found. Is it Boeing's time in the mid $40s? Yes, but buy in parts, and if the stock retreats to $40 it'll itself be a Dreamliner in the year(s) to come.

Comments

[mdpath:]

So how many shares do you own?

Jun 24 08:07 AM

[john s. gordon:]

perhaps it wasn't such a good idea to bring in bits & pieces from multiple vendors/sources all over & hope that the pieces fit together properly, i always thought that computer aided design was supposed to eliminate problems of this sort. of course with the hubble telescope there was that little dimensional problem with the optical system - inches not the same as millimeters.
> jack

Jun 24 08:39 AM

[Blue Hair:]

On Jun 24 08:39 AM john s. gordon wrote:

of course with the
> hubble telescope there was that little dimensional problem with the
> optical system - inches not the same as millimeters.
-------------------------
I think that was the Mars probe Jack

Jun 24 11:28 AM

[coloneldebu...:]

This stock is starting to look like a good bottom dweller pick. BA is getting hit from all sides lately it seems.

Jun 25 01:17 PM

[frosty:]

Three times in the last 10 or so years, when it appeared that Boeing was on the verge of becoming the most successful company on the planet, they made me cry. The last time was roughly a year ago when Airbus could do no right and Boeing was landing so many 787 orders they needed faster computers to count them all. Crash - a strike knocked the bottom out of the stock and I lost again. This may be the best time of all to buy Boeing, but over my 10 year history with the company I've seen payola fines, criminal investigations, strikes, overly rosey forecasts, etc., etc., indicative of a management culture that I will never trust again. There are thousands of other companies to invest in.

Jun 25 01:36 PM

[User 283977:]

So what's really happening here? Boeing has excellent engineering talent. I find it hard to believe that all of that excellent engineering talent at Boeing just figured out that perhaps there is a problem attaching the wings so they will stay on.

An alternative explanation is that Boeing management is following the computer industries "vapour ware" strategy where they pre-announce products and delivery dates to capture sales. The strategy is based on the notion that its not likely they will loose 100% of those pre-orders when they announce the "delays".

Will they get the tanker business? Don't know, but I do know their Raptor business is in trouble. Their may be some concerns about that dividend too.

All in all, I don't see any reason to own this stock at this time.

Jun 25 02:14 PM

[Chris Kraso...:]

Disclosure isn't included here. I do not own shares of BA. Would be looking to pick some up under $40 though, I think that's an attractive price and Boeing is still stocked with talent and airline orders. Although I'm still wary of the possibility that the Dreamliner might never be ready... vaporware in the airline industry? That's a new one.

Jul 08 04:49 PM