Boeing Stock Faces Uncertainty Amid 737 MAX 9 Grounding
Boeing stock has experienced a significant decline in value following an incident in which an emergency door plug blew out of an Alaska Air Group 737 MAX 9 jet. The duration of the MAX 9 grounding remains unknown to investors, along with the potential financial impact on Boeing, including customer compensation, repairs, and the effect on orders. Additionally, there is the intangible damage to the brand that cannot be easily quantified.
Despite these concerns, there has been a glimmer of hope for investors as shares of Boeing began to rise on Wednesday. This uptick in the stock price comes after the Federal Aviation Administration (FAA) completed a portion of its inspection work, indicating progress.
To date, the FAA has completed inspections on 40 MAX 9 jets out of the total 171 grounded by the agency. However, it is important to note that this does not signify an immediate return to service for these aircraft. In a news release, the FAA stated that all 737 9 MAX aircraft with door plugs will remain grounded until a thorough review of the inspection and maintenance process is conducted. The review must satisfy all safety requirements set by the FAA. Once the inspection and maintenance process receives final approval from the FAA, it will be necessary to implement it on every grounded 737 9 MAX before they can resume operations.
In early trading, Boeing stock showed a modest increase of about 2%, reaching over $204 per share. In contrast, the S&P 500 and Dow Jones Industrial Average experienced declines of 0.6% and 0.1% respectively.
Progress has been made, but uncertainty remains regarding the future of Boeing's stock as the grounding of the 737 MAX 9 continues. Clear guidelines and approvals from the FAA are imperative to instill confidence among investors and help restore the brand's reputation in the aviation industry.
Boeing Shares Drop as MAX 9 Grounding Continues
Boeing shares have experienced a significant decline in the wake of the Alaska Air incident, with a nearly 20% decrease leading up to Wednesday's trading. Over the past six trading days, shares have dropped five times due to ongoing issues with the MAX 9 aircraft.
On Tuesday, shares experienced an additional drop of nearly 8%, which was perceived as a capitulation. Deutsche Bank analyst Scott Deuschle noted that this decline occurred despite minimal new developments regarding the MAX 9 problems. However, Deuschle maintains a Buy rating on the stock and believes the downside risk is limited to $180, with a 12-month target price of $295.
Similarly, Jefferies analyst Sheila Kahyaoglu also rates Boeing shares as Buy, with a price target of $315. Kahyaoglu recently reported that Boeing has implemented measures such as adding quality inspectors to mitigate the impact of the grounding on 737 MAX 9 production. She emphasizes that the delay is temporary and shouldn't affect the production scheduled for 2024.
Though uncertainty remains regarding when the Federal Aviation Administration (FAA) will complete its evaluation and allow the planes back in service, both analysts view the recent dip in Boeing shares as an opportunity for investors.
It is worth noting that the MAX 9 represents a relatively small portion of Boeing's overall production volume. Approximately 30 out of the 700 deliveries expected from Boeing in 2024 will involve this particular model.
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