The S&P 500 and Nasdaq both broke into record territory in today's trade, but one stock - Boeing (NYSE:BA) - could single-handedly kill the recent market strength, warns strategist Bill Blain of London-based Shard Capital, which oversees $1B-plus in assets.
"I am concerned the market is underestimating just how bad things could go for Boeing," Blain writes, believing if the company continues to struggle, "the whole equity market will knee-jerk aggressively, triggering pain across all stocks."
"Boeing is hemorrhaging cash to build an aircraft no one can fly," Blain says, so the company is trying to rush deliveries of other aircraft to make up for it, which has presented its own issues, including problems with 787 Dreamliners that reportedly are suffering from "shoddy production and weak oversight" at Boeing's Charleston factory.
Blain also does not like Boeing's approach of upgrading its old aircraft instead of designing new ones, which "made commercial sense for Boeing to keep upgrading and upscaling [the 737] because it kept the factories delivering and they could tell regulators it was just an upgrade not a new design, saving billions on testing and training," but that led to cost-cutting that compromised the 737 MAX.
The analyst predicts the "likely trigger for a market shock will be... something so obviously hidden in plain sight it catches us completely and painfully by the short and curlies" - such as a Boeing downfall.
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