Everything looked good for Boeing, with a number of new military contracts and stock that was on the rise. Unfortunately, after the loss of two 737 Max 8 planes, Boeing planes across the globe have been grounded, and the stock is taking a big hit. That’s led many people to wonder: should they purchase Boeing stock, or should they be selling it?
From Record Production to a Sharp Crash
Boeing’s outlook earlier this year was fantastic. It had solid earning reports, had negotiated a number of new contracts and was dramatically increasing its production. In particular, new military contracts bolstered the optimism surrounding Boeing, and many investors listed the stock as a clear buy. Unfortunately, record levels of production could do little to protect the company against multiple crashes with the same aircraft.
The Boeing 737 Max 8 has been grounded in multiple countries, as it is suspected that it may have played a part in multiple crashes. On March 13th, the United States and Canada also announced that they would be grounding 737 Max 8 and 737 Max 9 planes.
Is the Boeing 737 Max 8 Dangerous?
Two recent crashes, from Indonesia and Ethiopia, have involved recently delivered 737 Max 8 planes. The 737 Max 8 has consequently been grounded because there are concerns that the plane itself could have caused these crashes.
Flight crashes are fairly uncommon, so when two crashed flights occur with the same type of plane in such a short span of time, it’s a reason for concern. This is especially true because the 737 Max 8 was recently introduced: it was still being tested in 2017.
However, there’s no actual evidence that the 737 Max 8 caused these issues yet. Theoretically, it could be a coincidence that both flights that crashed involved the same plane. While some industry insiders have remarked that there are issues with the 737 Max 8 — most specifically a lack of documentation for the aircraft — others have stated that they have no reason to believe that the 737 Max 8 is dangerous.
Boeing, in particular, has rejected the notion that the fault could lie within the plane, stating that it’s just a coincidence. Regardless, no one is likely to know the truth until a comprehensive investigation has been completed.
Pilots Report Issues
From April 2018 through December 2018, there were a total of 11 reports citing issues with the Boeing 737 Max 8. These reports generally had to do with the tools not operating as they should, in addition to the flight manual being “almost criminally insufficient.”
Further, both crashes in these planes appeared to happen in the same way, with the planes experiencing fluctuations in their speed and then attempting to land before the crash. This indicates that it could be a widespread problem.
Boeing as a Potentially Undervalued Investment
When a high performance stock crashes, the first inclination is to buy. But is Boeing a good buy right now? That really depends on the outcome of the investigation, which is something that no one can know.
If Boeing 737 Max 8 planes are found to be faulty, it could be tremendously damaging to the company, in addition to its future contracts and its customer perception. If, on the other hand, it’s found that the planes had nothing to do with the crashes, it’s possible the stock could immediately rebound.
Consequently, investors are taking a gamble if they want to invest in Boeing now. It could go either way, and there’s very little way for any investor to know whether the company will be found at fault. What is known is that there are reports from pilots that indicate that Boeing planes could have some type of fault.
At the same time, it doesn’t seem as though it’s the time to sell Boeing, either. Selling Boeing would be sensible only given a complete loss of faith. If an investor suspected that there were truly problems with the 737 Max 8 plane, that would be the only reason to sell right now, after the stock has already fallen sharply. Boeing hasn’t bottomed out: it had already increased in value significantly before the latest issues. And it still has a long way to fall, if it’s found to be responsible.
Regards,
Ethan Warrick
Editor
Wealth Authority
