Categories Industrials

Boeing stock remains volatile as fallout from Lion Air crash deepens

Shares of Boeing Company (BA), which contributed significantly to the Dow Jones’ sharp gains at the beginning of the week after the US-China trade war truce, had a negative impact on the index Wednesday. The stock suffered a big loss after officials of Lion Air, the company which operated the aircraft that crashed recently, hinted at canceling a bulk order for the new 737 MAX jets.

China being one of the company’s biggest markets, the de-escalation of trade tension had lifted market sentiment from the lows seen after the fateful crash involving the Boeing aircraft.

The de-escalation of trade tension had lifted market sentiment from the lows seen after the crash involving the Boeing aircraft

With the price descending from the recent peak, the stock is once again worth buying. The company has been receiving positive reviews from analysts, mainly due to the comfortable order growth and strong production target for next year. The outlook, also supported by the impressive cash position and favorable backlog, is expected to remain upbeat in the near future. Market watchers expect the share price to grow on average 30% from the current level of about $343.

In an indication that the Lion Air crash will continue to haunt the aircraft manufacturer for some time, regulators are constantly monitoring the 737 MAX aircraft currently in operation, in order to verify its safety aspects.

Boeing delivers more aircraft in October, but stock slips

In a major setback, Lion Air’s co-founder Rusdi Kirana this week said the company might cancel an existing order for about 200 Boeing 737 MAX planes, priced at $25 billion each. According to Kirana, Boeing acted in an ‘unethical’ manner by claiming that the accident was caused by lack of proper maintenance at Lion Air.

Interestingly, Lion Air is one of the largest customers of Boeing, next only to Southwest Airlines, and the first airline to operate the 737 MAX jets commercially. Meanwhile, canceling the order could be a costly affair for Lion Air as it will end up losing a part of the deposit it paid while placing the order and face penalty for withdrawing from the contract.

Boeing’s stock outperformed both the sector and the S&P 500 consistently over the past twelve months, gaining about 20% during that period.

 

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