Boeing Stock Rally Stalls as Deliveries Plunge to 60-Year Low

Boeing stock is due for a reckoning after growing 78% in a month despite losing money and not making or selling any airplanes.
Posted in: BusinessOp-ed
Published:
June 10, 2020 9:38 PM UTC
  • Boeing stock faced significant losses for a second straight day.
  • The company isn’t making or selling planes and is losing money fast.
  • But retail investors went crazy for air stocks in May.

Boeing stock (NYSE:BA) continued to slide into a second day of losses, creating some drag on the Dow Jones Industrial Average.

Boeing gave up over 5% of its share price Wednesday against the Dow’s more modest dip of 0.7%. The S&P 500 Index retreated an even more slight 0.3%. That shows the impact that Boeing stock has on the Dow level.

Boeing Stock Price Faces A Reckoning

Listen, I’m not an airplane industry expert, just an outside guy looking in. But what else can you say about Boeing stock? The airplane maker hasn’t been making airplanes. They haven’t been getting orders for planes. And they haven’t been making money.

Boeing deliveries hit a 60-year low in May of just four airplanes.

These realities about Boeing’s business make the stock’s steep 73% climb from $133 on May 8 to $230 on Jun 8 baffling. The brash Boeing rally coincided with a bull market in airline stocks, with American Airlines leading the way.

Percent Change Since May 8, 2020, to S&P 500 Index in blue, Boeing stock (NYSE:BA) in red, American Airlines stock (NASDAQ:AAL) in orange, United Airlines stock (NASDAQ:UAL) in gold, and Delta Airlines stock (NYSE:DAL) in teal. | Source: TradingView

While Berkshire Hathaway dropped its sizable airline holdings, retail investors have rushed in to buy air stocks. Ironically, they’re trying to invest like Warren Buffett and bet on American business at a bargain price because of the pandemic.

But everyone’s trying to be greedy while others are fearful.

Retail Traders Love Airline Stocks

Recent months have seen a surge in retail investors buying stocks. Many of them are betting against Buffett on Boeing stock.

Meanwhile, airline stocks are some of the most popular on the Robinhood stock brokerage app. American and Delta Airlines clock in at the third and fourth most held shares on the platform. United Airlines is 12th most popular, and Boeing is the 14th most commonly-owned stock.

327,000 Robinhood accounts currently hold Boeing stock, making it the 14th most popular on the app. Two major airlines rank number three and four. | Source: Robinhood

Ask retail stock traders how their big cannabis bet has worked out for them over the past year.

Casual stock traders went thrifting for bargain pandemic stocks this spring. But they bought shares in companies facing intense headwinds to profitability. And the airline industry is a notoriously fragile, low-profit margin sector of the economy. All three legacy airline companies mentioned above have declared bankruptcy in the last twenty years.

Retail investors in these three airlines also face a threat from Southwest Airlines (NYSE:LUV), which is expanding dramatically. Southwest is chomping at the bit to fly its 34 Boeing 737 MAX planes by the fourth quarter. It also plans to field 48 more of the latest Boeing 737 model update by late 2021.

Disclaimer: The opinions expressed in this article do not necessarily reflect the views of CCN.com. The above should not be considered investment advice from CCN.com. The author holds no investment position in any of the stocks mentioned at the time of writing.

Sam Bourgi edited this article for CCN.com. If you see a breach of our Code of Ethics or Rights and Duties of the Editor or find a factual, spelling, or grammar error, please contact us.

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W. E. Messamore @thehuli

Markets Contributor for CCN living in Nashville, Tennessee. Bachelor of Business Administration from Belmont University in 2009 (majored in Entrepreneurship). Organized Senator Rand Paul's first and second online fundraisers in 2009. Roving editor for the Independent Voter Network since 2013. Email me | Link up with me on LinkedIn | My Website | Follow Me on Twitter (followed by: fmr Rep. Ron Paul (R-TX), Sen. Rand Paul (R-KY), fmr NM Gov. Gary Johnson, and Rep. Thomas Massie (R-KY))