Boeing (NYSE:BA) stock has been battered due to controversy surrounding the launch of the MAX 8. New information has come to light that revealed the top-down skepticism that key Boeing employees had regarding the plane’s reliability. Up until now, two Boeing Max 8 planes have crashed. These accidents claimed the lives of 346 people.
The company responded by firing CEO Dennis Muilenburg. He left with a $62-million payout. Unsurprisingly, this has done little to silence the scrutiny that is building after these tragedies. Boeing is pouring resources into the plane to repair its shortcomings, but these incidents have done long-term damage to its credibility.
Why then, is Boeing a potential buy-low candidate? Its shares have dropped 7.4% year-over-year as of close on January 17. Boeing is the largest aircraft manufacturer in the world, and it is also the world’s second-largest defence contractor. In previous article I’d discussed why defence contractors will continue to thrive as nations around the world have greatly increased their military spending.
Boeing is set to release its fourth-quarter and full-year results for 2019 later this month. In the third quarter, Boeing reported a 95% drop in profits as the company is wrestling with major lawsuits and billions in losses related to the grounding of its Max 8 aircraft.
The stock is a high-risk play as it tangles with this monumental crisis.
Analysts expect that Boeing will have to absorb an enormous loss going forward. The stock possesses a high price-to-earnings ratio of 49 and a sky-high price-to-book value. Shares are just too dangerous to touch for me right now.
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