There Are Four Reasons Boeing Stock Can Bounce Back After Dropping On Two Counts

Boeing BA +2.56% investors have a lot to digest over the past few days, what with MAX jets, tankers, manufacturing, and the Federal Reserve Board acting inconsistently. While shares are down, the markets might be overlooking the good news in favor of the bad.

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It was just the third time since 2023 that Boeing shares closed below $200 during the session. This was an 8.54 percent drop, or 4.2%, from Wednesday's closing price of $196.16.

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Several reasons can be identified and they are not difficult to identify. Earlier in the day, Chief Financial Officer Brian West, according to BofA Securities analyst Ron Epstein, informed an analyst that the 767 refueling tanker being used by the Air Force had a quality problem and that the fix will negatively impact quarterly results.

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As a result of that news, Boeing shares fell around $4. Investors have become cautious of any quality issues related to Boeing. The 787 commercial jetliner was halted for several months because of quality issues. In addition, there was a design flaw in the 737 MAX that caused it to be grounded worldwide from March 2019 through November 2020.

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Furthermore, Boeing has missed Wall Street predictions for 12 of the past 15 quarters. That is problematic for investors. Missing estimates can increase stock volatility as well as erode the confidence that investors have in management at Boeing.

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Following the Fed's 0.25 percentage point hike in interest rates on Wednesday, shares dropped an additional four percent or more, with most stocks falling. The S&P 500SPX was down 1.7%, while the Dow Jones Industrial Average DJIA -1.44% fell by 1.6%.

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As a result of Wednesday's announcement, there was recently some much better news. According to the Financial Times, Ryanair (RYAAY) is planning to buy 737 MAX jets. Ryanair (RYAAY) has more than 400 Boeing 737 family jets in its fleet, and it has also expressed interest in the 737 MAX.

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Boeing announced Thursday that Japan Airlines had ordered 21 737 MAX aircraft, as well as a potential order, which is good news. Boeing announced Thursday that these orders were a good sign.

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The FT reported that some Boeing executives were saying they see the end of delivery problems for the company in the near future. That might be the best news of them all after years of supply chain problems, design problems, and quality problems.

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According to the report, Boeing did not respond to a request for comments about the report as soon as it was made.

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It is important to remember that Friday was also a good day on Wall Street. Wolfe Research analyst Myles Walton said Thursday that investors should be on the lookout for entry points for this stock below $200 a share. He is rating shares Buy and is positioning the stock at a $220 price target.

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As a result of the twin problems in 2017 and 2018, Boeing generated $11.6 billion and $13.6 billion in free cash flow in 2017, respectively, before the twin problems of the MAX grounding and the pandemic hit Boeing. Walton believes Boeing will generate $10 billion in free cash flow by the middle of the decade.

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In premarket trading, Boeing stock is up about 0.7% in premarket trading on Thursday, after Wednesday's disappointments pushed it down more than 5%. S&P 500 futures are up about 0.5% at the time of writing.

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In the last 12 months, Boeing stock has managed to gain roughly 5% and about 3%, respectively, in comparison to its year-to-date performance.