The Boeing Company is a company based in the United States. The company designs, manufactures, and sells a wide variety of aerospace products and related services (like financial and maintenance). The company manufactures popular defense products (like the F-15 Fighter Jet) and commercial aircraft (like the Boeing 787 and 737 MAX).
Can It Change?
- Boeing is a great reopening play in an investor’s portfolio. The company saw a rise in cancellations and a drop in new orders as the pandemic reduced the demand for air travel and defense spending. However, once this pandemic is over, the company will see a rise in demand for their products as demand for air travel will rise.
- Travel demand around the world has surged far faster than many experts and airlines had expected due to high vaccination rates and lower case rates (especially over the summer). This led many airlines (like United and Southwest) to order hundreds of MAX aircraft from Boeing. As the holiday season comes around, I expect new orders for the MAX to be placed.
- Boeing’s revenue and profits come from the delivery of aircraft to airlines and customers. As the Boeing 737 MAX returned to service around the world, this has allowed Boeing to deliver more airplanes to customers, leading to a surprise profit in its last quarter. I think that this delivery performance will continue to benefit Boeing.
- As this pandemic comes to an end, the Biden administration will start to look to sign trade deals with allies. This will authorize the sale of billions of dollars of commercial aircraft and defense products. These trade deals will help Boeing recover from this crisis and will also benefit investors in the company.
- The company faces tough competition in the commercial aircraft and defense industry. Some of these competitors include Airbus, Northrop Grumman, Raytheon Technologies, and many others. This competition might hurt the company and its investors.
- Boeing shut down and froze deliveries of its Boeing 787 aircraft a couple of months ago in order to fix a technical fault on the aircraft. Though the aircraft is lightly used around the world at the moment (weak demand for long-haul international travel), this will negatively impact the company’s results and will hurt investors in the company.
- The Boeing 777X used to be one of Boeing’s most promising long-term programs, with hundreds of orders and new growth opportunities for the company. However, after the Boeing 737 MAX and COVID-19 crisis, the company has heavily delayed and reduced investments in this program. Though the company remains committed to this program, this will cause a headache.
I think that Boeing is a good long-term investment due to its position as a good reopening play, the return of travel demand, the return of the MAX jet, as well as future orders and trade deals. However, tough competition, manufacturing issues with the Boeing 787, as well as 777X issues might hurt the company and its investors in the future.