Boeing Company Stock Has Taken Off
Boeing stock is currently trading at $178.83 per share, up 0.78% or $1.39. The US aircraft and parts manufacturer is gearing up for a bullish year, what with President Trump calling on the manufacturer to reduce its costs to lock-in big orders from the government.
Presently, the Boeing Company (BA) has a market capitalization of $109.51 billion with a price/earnings ratio of 23.49. This week is going to be a harbinger of market performance when Trump addresses a joint session of Congress to outline his economic policies and overall agenda.
Analysts will be carefully eyeing the speech for hints about fiscal policy and investment spending, government proposals for the border wall with Mexico, Obamacare, and overall taxation reform.
Boeing is one of the biggest US companies, and the stock will react sharply to Trump’s address on Tuesday evening. Some 37 of 39 components of the iShares US Aerospace & Defense exchange-traded fund traded higher after Trump announced that he would be seeking $54 billion to bolster defense. The increased expenditure would be offset by decreases elsewhere, although Trump didn’t specify.
Is It Safe to Place Call Options on Boeing Stock?
To answer that question accurately, it’s important to gain a broader perspective on The Boeing Company. A brief mention should be made that the prevailing price of BA stock ($178.83) is higher than the 50-day moving average ($161.66) and the 200-day moving average ($140.08).
This simply means that the trend is positive and this is evident from the gains we have seen since mid-February. Multiple successive sessions of strong gains are apparent with Boeing, and this lends itself to call options. Is this sustainable? That’s the question binary options traders want to know. Over the past year, the stock has rallied strongly, with gains of approximately 60% being recorded.
Let’s take a look at some of the positives for the company and how this will likely affect the price of the stock:
- Boeing received a $22 billion contract from the fourth largest airline in India, SpiceJet. India requires 1850 new planes within the next 2 decades, with a $265 billion valuation on that deal. Overall, $2.3 trillion worth of planes will be required in Asia-Pacific, and this is good news for Boeing.
- 34 orders worth $4.9 billion of the KC-46 A refueling planes have been placed since August 2016
- Boeing does not receive government handouts, but defense contracts will certainly boost the stock, what with Trump’s plans to spend billions of dollars on upgrading defense and infrastructure.
With Boeing it’s complicated, but the Bulls edge ahead of the Bears
On the flip-side, there is a concern in certain circles if Trump gets into it with countries like China, India and Mexico. Boeing derives upwards of 60% of its revenues for commercial aircraft from non-US airlines. There is also concern from the International Air Transport Association that airline revenues and profitability for the industry are on the decline in 2017 and beyond.
Boeing is also behind schedule when it comes to delivery of its 777 and 777X aircraft. More orders are needed before deliveries will be made in 2020. Perhaps the most pressing concern for Boeing stock is the outlook for the company.
BA stock has risen approximately 16% over 1 year, double that of the S&P 500 index. However, most of the gains for Boeing took place since September 2016. That the stock is flourishing, and trading near all-time highs is significant. The contraction in the oil price is a source of concern for Boeing since it means that fewer people will be flying if prices rise too highly.
Binary Options Traders Have Plenty of Latitude and Here Is Why
Analysts do not foresee a sharp uptick in oil prices beyond $70 per barrel by 2022. That will curtail price rises, besides which airline companies purchase their jet fuel at fixed prices via contract. One of the negative trends we are seeing for Boeing is the decline in commercial airplane orders. Between 2012 – 2014 some 1,000+ planes were ordered per annum. That dropped to 668 by 2016. This is naturally of concern to Boeing since it means that revenues and profits are moving in the opposite direction to the stock price.
On a positive note, the backlog for Boeing is high, with 5,700+ orders awaiting fulfillment. While Boeing lost billions of dollars in recent years, it is on track to start making some money, and this will benefit the industry and traders. Trump’s tax policies vis-à-vis border-adjusted taxes could benefit Boeing when it exports its products overseas, meaning that the tax rate could effectively plunge to 0. We could see traders and investors moving in either direction: locking in profits and selling short, or going long on the stock.
Disclosure: None.
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