Boeing’s Plunging Stock Near Erasing 2018 Gains

By Michael J. Kramer | November 20, 2018 — 6:00 AM EST SHARE  

(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Boeing Co.’s (BA) stock has fallen 19% from its 2018 highs and is now facing even steeper losses. Technical analysis suggests that the stock may fall 7% more in the coming weeks. Should that happen, the stock would have erased all of its gains in 2018, putting it well into bear market territory.

The bearish sentiment comes despite analysts increasing their fourth quarter and full-year earnings and revenue forecasts. 

BA Chart

BA data by YCharts

Weak Technicals

The chart shows that Boeing’s stock is falling below technical support at $320. It would suggest that the stock is likely to decline to the next level of technical support at $298. The relative strength index for the stock is also trending lower suggesting that bullish momentum is leaving the stock. Make It Live

Upping Estimates

Despite the bearish sentiment on the stock, analysts have been raising their forecasts on the company. Over the past month, fourth-quarter earnings estimates have risen 8% to $4.55 per share. Meanwhile, revenue forecasts have increased 1% to $27.04 billion. 

The outlook for 2019 has improved as well. Analysts now see earnings growing 20% up from previous estimates in July for growth of 18%. Additionally, revenue growth estimates have increased as well to 6.5% up from 5.8%. 

BA EPS Estimates for Next Fiscal Year Chart

BA EPS Estimates for Next Fiscal Year data by YCharts

However, shares of Boeing are still not cheap when compared to its historical range trading with a 2019 PE ratio of 17.7. Since 2015, Boeing’s stock has historically traded in a range between 13 and 27. It wasn’t until the second half of 2017 that Boeing started a significant multiple expansion. It would seem the market is now in the process of returning Boeing to its historical norm. 

Boeing’s stock has not been the only casualty during the most recent stock market sell-off and is not unique. Many stocks have suffered as investors’ anxiety rises around the threat of a global economic slowdown, with the pending trade wars between the US and China also weighing in. For the stock to recover it may take a change in sentiment more than improving company fundamentals. 

Michael Kramer is the Founder of Mott Capital Management LLC

Read more: Boeing’s Plunging Stock Near Erasing 2018 Gains | Investopedia
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