Summary: OVERPRICED
Score: 4/20
MOS: 0%
Share Price: $255
Sticker Price: $0
Is Boeing stock a good buy?
Boeing is a manufacturer of airplanes, rotorcrafts, satellites, telecom equipment, and missiles. They also provide leasing and product support services. They are among the largest aerospace manufacturers and the second-largest defense contractor in the world. They were founded in 1916 and are based out of Chicago, IL.
I recently read an article from Investorplace.com that states that Boeing is a screaming buy right now. Apparently, the criteria are based on 4,700 analysts with two factors being success rate and return-per-recommendation.
In this case, I have to push back on that recommendation, and here is some supporting evidence.
This article from travelpulse.com says the airline industry may not recover until 2023 at the best case and 2025 at the worst case.
This article from economist.com says business travel may never fully recover from Covid-19.
This article from cnbc.com quotes Bill Gates saying “50% of business travel will disappear.”
This article from investopedia.com says that business travel accounts for 12% of airline passengers but accounts for 75% of the profits. Although Boeing is not an airline, it is directly impacted by the demand of the airline industry and right now, there is very low demand.
If you have flown within the last year, either domestically or internationally, you probably noticed airports and airlines are like a ghost town. I did some traveling around the US last fall and an airport felt like a scene out of a zombie apocalypse movie. In some parts of the airport, I was the only customer. The airplane itself was actually at 50% capacity which means the airlines are losing money.
Airplane manufacturers and airlines are in dire straights. Leisure travel will still be in place but businesses have found they can be just as effective, if not more effective, with employees working from home using platforms like Microsoft Teams or Zoom.
My thoughts are planes won’t get bigger, they will get smaller. With less demand for travel, Boeing now has an opportunity to innovate. In the Marvel Movie Iron Man 2, Elon Musk has a cameo where he shakes Tony Stark’s hand and says he has an electric jet idea. Maybe that fun comment will become reality? Are smaller electric jets the future? Based on my homework it looks like it won’t be anytime soon but with the rate of technological advancements, it may be possible someday. Overall, Boeing needs to make some changes.
Now let’s take a look at the financials over the past few years.
Revenue (Found on the Income Statement)
2017: $94B
2018: $101B
2019: $84B
2020: $58B
Revenues are decreasing rapidly.
Net Income (Found on the Income Statement)
2017: $8.4B
2018: $10.4B
2019: $-636M
2020: $-11B
Net income is also decreasing rapidly.
EPS (Found on the Income Statement)
2017: 11.75
2018: 17.74
2019: 8.32
2020: -13.69
EPS is also decreasing rapidly. This is why the MOS is 0%.
Net Change in Cash (Found on the Cash Flow Statement)
2017: $18M
2018: -$1B
2019: -$1.7B
2020: -$1.7B
Net Change is Cash the last two years is awful.
Total Assets (Found on the Balance Sheet)
2017: $112B
2018: $117B
2019: $113B
2020: $152B
The Total Assets are surprisingly increasing.
Total Liabilities (Found on the Balance Sheet)
2017: $110B
2018: $117B
2019: $142B
2020: $170B
The Total Liabilities are increasing.
Total Debt (Found on the Balance Sheet)
2017: $9.7B
2018: $10.6B
2019: $19.9B
2020: $61B
The Total Debt is increasing rapidly.
Total Equity (Found on the Balance Sheet)
2017: $1.6B
2018: $339M
2019: -$8.6B
2020: -$18.3B
The Total Equity is decreasing rapidly.
With a score of 4/20 and a MOS of 0%, Boeing is too risky. Knowing the airplane manufacturer and airline industries are being disrupted at the moment should motivate us to watch these stocks from the sidelines.
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