Last week an Alaska Airlines flight experienced a near disaster on its flight from Portland, Oregon to Ontario, California. A Boeing 737 Max 9 aircraft experienced a full panel blowout just 6 minutes into the flight.
As a result of the scare, the Federal Aviation Administration (FAA) made the decision to ground 171 Boeing 737 Max 9 aircraft for further investigation. Shares of Boeing (BA) are down more than 9% in the last week as a result. It’s currently on track for its worst day in 8 months.
The airline manufacturer is coming under major scrutiny as it experiences more and more issues. In the past 5 years 346 people have died in separate plane crashes aboard Boeing 737-8 MAX planes. In these incidents, planes were grounded for 20 months. There is no timeline for the current grounding.
One thing we know for sure, though – as Boeing seeks to ramp up production, regulators want the company to slow down and focus more on quality control. It’s clear that the QA process for Boeing needs work. The panel that blew out is subject two to separate safety checks – both of which failed to identify the issue before it happened.
All that being said, analysts do not suspect there will be a major financial fallout for Boeing as a result of this issue. It is believed that the problem is limited to this specific plane and not a general design problem across the board for 737-8 MAX planes.
However, every day these planes are grounded, Boeing is bleeding money. Citi analyst Jason Grusky says one can look to Raython’s recent challenges as a model for what to expect, with an estimate of $2.3 million per day as all 170 aircraft are grounded. Others say the cost could be as high as $18 million or more over the course of a week.
If you’re currently invested in BA or see the stock dropping as an opportunity to buy in at a great value, you’re looking for clarity on what this news means for you. We’ve taken a look at this stock through the VectorVest stock forecasting software and uncovered 3 things you need to see.
BA Has Poor Upside Potential But its Safety and Timing are Fair
VectorVest simplifies your trading strategy through a proprietary stock rating system, which has outperformed the S&P 500 index by 10x over the past 20 years and counting. You’re given all the insights you need in 3 ratings: Relative value (RV), relative safety (RS), and relative timing (RT).
Each rating sits on its own scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy. You’re even given a clear buy, sell, or hold recommendation based on the overall VST rating for a given stock. As for BA, here’s the current situation:
- Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (based on a 3-year price projection) to AAA corporate bond rates and risk. This offers much better insight than a simple comparison of price to value alone. BA has a poor RV rating of 0.71 right now and is overvalued as well. Its current value is just $85/share.
- Fair Safety: That being said, BA is still a fairly safe stock. It has an RS rating of 0.86, which is considered fair albeit a ways below the average. This rating is based on the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors.
- Fair Timing: The stock may have fallen more than 9% in the past week, but BA still has fair timing - with an RT rating just above the average at 1.07. This rating is based on the direction, dynamics, and magnitude of the stock’s price movement day over day, week over week, quarter over quarter, and year over year.
The overall VST rating of 0.91 is a bit below the average but deemed fair nonetheless. BA is currently rated a HOLD in the VectorVest system. But, you can dig deeper and learn more through a free stock analysis at VectorVest - transforming your trading strategy for the better!
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VectorVest advocates buying safe, undervalued stocks, rising in price. BA is down more than 9% in the past week after a panel blow-out led to more than 170 planes being grounded. The stock may have poor upside potential, but its safety and timing are still considered fair.
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