Boeing's stock should be in the penalty box for now, investment manager says

By Tomi Kilgore

The 'especially disappointing' 737 Max 9 issue could pressure the stock for a while, but fundamentals aren't expected to change

Boeing Co.'s stock could continue to sell off over the near term, even if the latest 737 Max issues don't affect the aerospace giant's business very much, one investment manager said.

Some Wall Street analysts said the drop in Boeing's stock (BA) on the most recent 737 Max 9 news has created a good entry point for investors, since the financial impact for the company should be minimal.

Jerry Braakman, chief investment officer of California-based First American Trust, which manages $2.3 billion, said while he agrees that Boeing's fundamentals remain bullish, he believes it's too early to buy on the current dip.

"The stock is in the penalty box for a while," Braakman said. "There's probably still more selling pressure, and that might continue for a couple weeks."

Boeing shares fell 0.7% in afternoon trading Tuesday, after tumbling 8% the day before.

Braakman said that the latest 737 Max issue, which is related to how a Boeing part is installed, is certainly not as severe as prior problems, which were related to how Boeing products were made. Basically, he said, the issue is likely just a "road bump" and doesn't change what Boeing is or where it's going.

Investors will get a peek at Boeing's fundamentals and an idea of management's outlook when the company reports fourth-quarter results on Jan. 31.

Braakman said, however, that the latest issue was "especially disappointing" given the timing, as investors were starting to become emboldened as airplane demand picked up.

The stock had just run up 36.8% in 2023 to snap a three-year losing streak in which it tumbled 41.5%. In comparison, the S&P 500 index SPX gained 24.2% in 2023, after rising 18.8% over the previous three years.

"For me, from an investment standpoint, now you have another issue when they were just leaving those past issues behind," Braakman said. "Just when you think there's daylight, you run into another cloud."

So while he doesn't believe investors should rush to buy the stock, at the moment, he doesn't believe investors who already own it should sell. And at some point, he said, there will be a reason to buy again.

(For full disclosure, Braakman said he owns the stock personally, but it's not on the buy list for clients.)

"The reason for owning Boeing is it's got a great product line, it doesn't have much competition and there continues to be airline demand for its product," Braakman. "[The issue] is unfortunate, but it's not a thesis-changing reason to own the company."

That doesn't mean investors should rush to buy, or try to pick a bottom for the stock. Wait a while, he said, to see what the regulators decide and how the stock plays out.

"You don't want to catch the falling sword," Braakman said.

-Tomi Kilgore

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01-09-24 1526ET

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