Boeing Could Test March Low

Dow component Boeing Co. (BA) reported a Q3 loss of $1.39 per-share last week, underpinned by a 29.2% year-over-year revenue decline to $14.14 billion. Commercial airline revenue fell a staggering 56% y/y, held down by slumping demand and the 737 MAX grounding. The results beat bearish top and bottom line estimates but that didn’t forestall a sell-the-news reaction dumping the aerospace giant to a 5-week low. The stock has now reached September range support in the 140s, with a breakdown favoring a test of the May low near 114.

MAX 737 Grounding Coming To An End

The European Commission recently gave the OK for Boeing to return the troubled 737 MAX jetliner to the skies but the U.S. Federal Administration (FAA) has determined the software ‘fix’ for certain planes was not ‘adequate’. Even so, the jet should get its airworthiness certificate reinstated prior to year’s end, lifting a dark cloud off the company. However, the pandemic has taken its place, with at least two more years before a return to traditional demand.

Fitch downgraded Boeing debt to a highly cautious ‘BBB-‘ after the release, stating they don’t expect air travel to return to 2019 levels until the end of 2023. The rating agency noted that “downgrades reflect a prolonged recovery from the pandemic compared with Fitch’s original expectations, continued pressures from the 737 MAX grounding, and Fitch’s estimate that Boeing will be challenged to return financial metrics to levels consistent with a ‘BBB’ by the end of 2022.”

Wall Street And Technical Outlook

Wall Street has maintained a marginally-positive ‘Moderate Buy’ consensus based upon 7 ‘Buy’ and 8 ‘Hold’ recommendations. Amazingly, not a single analyst is telling shareholders to close positions, even though revenue may not return to pre-COVID levels for years. Price targets currently range from a low of $137 to a Street-high $260 while the stock is set to open Monday’s U.S. session just $7 above the low target.

Boeing topped out and sold off after the March 2019 Ethiopian crash and broke 200-day EMA support at year’s end. The first quarter’s pandemic decline completed a double top breakdown, signaling a secular downtrend that remains in force as we head through the fourth quarter. The stock has failed to test either broken support level, reinforcing the bear case while raising odds the downtick that started in June will eventually test the March low.

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