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Boeing Stock Is Undervalued; Buy the Dip

boeing stock

Boeing (NYSE: BA) stock stood among the laggards in fiscal 2019. BA share price plummeted sharply after the emergence of 737 MAX issues. The huge increase in debt along with a significant decline in financial numbers due to the impact of 737 MAX grounding increased bearish sentiments. However, the prospects started improving for the largest aerospace and defense company.

Boeing stock price plunged more than $100 from an all-time high of $446 that it had at the beginning of fiscal 2019. Its shares are currently trading at $333, up slightly from a 52-weeks low of $319 a share. BA share price could see improvement in the coming days. This is because of the chatters of the stake from big players and an upgrade from Moody’s.

Boeing Stock

Prospects are Improving for Boeing Stock

The future fundamentals started improving for Boeing following rumors of the stake from big players. The market reports are suggesting that Warren Buffet is likely to buy Boeing shares following a massive share price drop in the past three quarters. Buffett is popular for buying stocks that are trading below the fair value with strong future fundamentals.

BA shares lost significant value in the past few months and its valuations are trading below the industry average – which makes it an attractive pick for value investors.

Moreover, the upgrade from Moody’s shows that the company is in a strong cash position to fulfill its liabilities. Moody’s shifted from Negative to a Stable outlook on Boeing.

The rating agency said, “The stable outlook reflects the company’s strong liquidity and financial flexibility which, together with stability in the defense business and ongoing growth in services, mitigates the impact while the MAX remains grounded.”

Cash Position Is Strong Enough to Cover Liabilities

Boeing stock

Boeing has been experiencing pressure on its cash position and cash flows amid the huge drop in earnings and payments related to 737 Max grounding. Nevertheless, its cash position is strong enough to cover liabilities. It had almost $10.9 billion in cash at the end of the latest quarter compared to debt of $22 billion. The reports are showing that Boeing can expand available funds to $20 billion through financing from debt markets.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.