Why Boeing Stock Just Bounced Back
Key Points
Boeing stock sank on news of a 737 "software glitch" yesterday.
FAA is postponing certification of the 737 MAX 10.
NASA, though, just announced a plan to return Boeing's Starliner spacecraft to operations.
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Boeing (NYSE: BA) stock had a bad case of the Mondays, er, Monday. Shares closed down nearly 7% after The Wall Street Journal reported that Boeing has identified a new "software glitch" on its 737 MAX airliners. Soon after, we learned the Federal Aviation Administration will postpone certification of the 737 MAX 10 airliner pending resolution of the glitch.
But Tuesday is a new day. And today, Boeing stock is up 2.8%.
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Why Boeing stock is moving higher
Part of the credit for today's move goes to investment bank UBS, where analyst Gavin Parsons just reiterated his "buy" rating on the aerospace stock. Worries over the glitch have investors "pricing in a high probability of a material negative impact to cash flow," says Parsons. But according to StreetInsider.com, the analyst thinks investors are "underweighting the normalized earnings potential, which in our view is unchanged."
Near term, Parsons agrees that Boeing faces some risks to cash flow -- and even the potential for renewed cash burn as deliveries are delayed by Boeing customers such as Southwest Airlines and United Airlines.
Long-term, however, the analyst believes (and I agree) that Boeing will patch the software glitch (management says this should happen by "early 2028"), resume deliveries, and recoup the cash it loses.
More good news for Boeing
And then there's the bit of good news that UBS didn't mention. In a broadcast press conference yesterday, NASA Administrator Jared Isaacman appeared along with astronauts, NASA staffers, and a Boeing representative to announce the return of Boeing's troubled Starliner spacecraft to flight.
More than that, it sounds like Starliner will soon be NASA's preferred means of transporting astronauts to the International Space Station, replacing SpaceX's (NASDAQ: SPCX) Falcon 9 and Crew Dragon.
Despite the headlines, things are looking up for Boeing.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Boeing. The Motley Fool has a disclosure policy.
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