By Al Root
March 28, 2022 10:58 am ET
Boeing stock is lower Monday morning. The company’s regulatory woes might be creating another overhang in the shares. The new issue relates to a new version of the 737 MAX.
The 737 MAX 10 is the stretched-out version of the MAX. It is due to be delivered in 2023, but according to reports, the Federal Aviation Administration, or FAA, has told Boeing that it’s likely the agency won’t be done with its review process by the end of 2022. Boeing declined to comment about regulatory reviews.
The “certification delay risk [is] a near-term overhang” for Boeing stock, wrote Cowen analyst Cai von Rumohr in a Monday report. He thinks the new bad news about the MAX could keep investors on the sidelines for a few months, but “we don’t think potential for MAX 10 certification delay will be a showstopper.”
The MAX 10, after all, could still be certified in time to meet Boeing’s original projections. He still rates Boeing stock at Buy with a $230 price target.
Investors appear to have reacted to MAX news with some caution, like von Rumohr suggested. Boeing stock down about 0.6% in Monday trading, while the S&P 500 is flat, and the Dow Jones Industrial Average is down about 0.3%.
Boeing stock also fell Friday, when the MAX 10 news first surfaced. Boeing stock dropped 0.1% while the S&P rose 0.5%.
The moves are small, but Boeing investors are wary of more bad news. The MAX was grounded worldwide from March 2019 through November 2020 following two deadly crashes inside of five months. Boeing stock is still down almost 60% from an all-time intraday high of roughly $446 set just before the second MAX crash.
Stock of Boeing peer Airbus is down about 23% from its all-time high of almost $140 in early 2020.
Overall, Boeing stock is popular, with 75% of analysts covering the company rating shares at Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 58%. Airbus is a little more popular, with 84% of analysts covering the company rating shares at Buy.
Jun 19, 2021 — Boeing has almost 500 orders for the Max 10 from airlines such as United Airlines, Copa Airlines and Virgin Australia.
ReplyDeleteA certification delay is nothing unusual for a new model or version, in this case a stretched version of an existing model. However, the MAX line series has caused investors to be skittish, which is unfounded at best these days. If airlines didn't trust Boeing to get it right, there wouldn't be hundreds of orders for this new Max 10 already.
ReplyDeleteThat said, Congress made a change in 2020 to how the FAA certifies new aircraft, specifically related around cockpit flight alerts as a result of the original MAX crashes. All manufacturers must go through this more stringent process. If the FAA doesn't have full confidence that Boeing won't meet the new more stringent mandates, then that is indeed troubling that the company can't adapt quickly.