Boeing’s (NYSE:BA) spectacular 10% weekly drop have investors wondering when the selling pressure will end. The second Boeing 737 MAX crash with Ethiopian Airlines led to the plane getting grounded worldwide. The cost to Boeing’s reputation, from a safety and reliability perspective, is now in question. Until investigators report their findings, BA stock could continue to face selling pressure on the stock markets.
Bets on BA stock option puts rose last Tuesday to 237,000 contracts. Expectations for a drop of at least 10% may play out for bears in the near-term. Still, if the investigation does not reveal anything that would prolong the grounding of the 737 MAX, the stock could stop falling.
Last week, Boeing said it would fix the software within 10 days. The speedy response could restore confidence in the plane’s safety. But the automatic stabilizers may have played a role in the cash of the Ethiopian flight and the Lion Air Flight in Oct. 2018. If the automated system is at fault, Boeing may need software and hardware fixes in place.
Valuation
At a 21 times P/E, BA stock is still not at a big discount that would attract value investors. Prior to the 2019 rally to over $440, the stock traded in a range of $280 - $340. The stock could re-enter that trading range as growth stalls while airlines re-evaluate the use of 737s in their fleet.
