Why Boeing shares are down today
Boeingit is (NYSE:BA) The main competitor has secured a massive new commercial order from China worth an estimated $37 billion, a deal that highlights the US aerospace maker’s struggles to sell in this important market. Investors were disappointed, sending Boeing shares down as much as 6.2% in Tuesday trading. They were still down 2.34% as of 1:30 p.m. ET.
Boeing and Airbus benefit from a duopoly in the commercial aircraft market, but the battle between the two companies is intense. Airbus won a key battle over the weekend by announcing that China’s three major airlines had committed to order nearly 300 planes, one of Airbus’ largest single-day orders and the first major flight operation in China. China since the start of the pandemic.
Asia, and China in particular, is an important part of Airbus and Boeing’s growth plan. Boeing still has hundreds of planes on order from Chinese and Hong Kong-based carriers, but the size and scale of this order is a huge win for Airbus.
The news is compounded by the perception that Boeing is currently struggling to do business in China due to broader geopolitical concerns. Boeing said the same in a statement to reporters following the Airbus announcement, with a spokesperson quoted as saying, “it is disappointing that geopolitical differences continue to limit US aircraft exports.”
Geopolitical concerns have also been blamed on China’s reluctance to recertify Boeing’s 737 MAX, a plane that was grounded for 18 months for safety reasons but is now cleared to fly in the United States and China. most of the world.
Boeing has had a tough few years due to the 737 MAX issues and the pandemic. The question for investors is how long will it take the aerospace giant to recover. And China, unfortunately, is a big part of that answer.
Boeing’s debt rose from less than $15 billion to more than $60 billion during the pandemic as the company scrambled to ensure it would survive. For the stock to take off from here, that debt needs to be repaid, and for that to happen, Boeing needs strong trading cash flow coming through the door.
Fears of a recession eating into airline profits and hurting demand for new planes are already weighing on the stock. The idea of Boeing being shut out of the all-important Chinese market, even temporarily, is another shock to investor confidence.
There are a few catalysts on the horizon, including great potential Delta Airlines order that is prevalent, but China is a massive overhang.
Boeing will likely weather this turmoil eventually, but investors should realize that it will take quarters, if not years, for that to happen. With so much uncertainty and an extended timeline, there’s not much to be excited about Boeing stocks right now.
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Lou Whiteman holds positions at Delta Air Lines. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.