Boeing’s Balancing Act, Virgin Galactic Flies While Lordstown Slowly Dies
Great Ones, can Boeing (NYSE: BA) take me high enough? To fly me over yesterday?
Don’t tell me, I know this … Damn Yankees?
Ding ding! If it’s not Mr. Mister with “Broken Wings,” you know “High Enough” is pretty much my other default song every time Boeing comes up…
First things first: What’s up with Boeing?
Several factoids, several lil’ newsworthy nuggets, sent BA 4% higher yesterday. But yesterday’s rally was just a memory — just a memory — and BA came crashing down 2% today.
Yesterday, Bernstein Analyst Douglas Harned upgraded Boeing stock to outperform. (I thought the Bernsteins were bears, not bulls? Hmm.) Harned also raised his price target from $252 to $279, optimistic that air travel will tick up and improve over the next few months.
Of course, this is barring any new COVID-19 variants emerging, which analysts in their infinite wisdom “do not expect.” I’d say that’s a pretty big variable to not expect or plan for, but let’s back-burner the pandemic for a sec, if that’s possible.
There’s more greatness coming from BA today — out of China, no less!
Boeing’s 737 MAX just finished a successful and safe test flight for China’s aviation regulator. The beleaguered Boeing design is one step closer to final approval for China’s skies, and Boeing hopes the 737 MAX may fly again by year’s end. Hoorah, hooray.
Things ain’t too shabby stateside either: Boeing just won a $23.8 billion follow-up contract with the U.S. Department of Defense (DoD) to service a fleet of 275 C-17 Globemaster IIIs over the next decade.
Sure, some cheapskate airlines balked at Boeing’s prices — cough Ryanair cough — but you bet the DoD already has its checkbook at the ready.
All told, BA rallied 4% as the laundry list of news items unfurled yesterday, ending in a hangover today as BA slipped 2%. But why? We’ve got great news from Boeing, and clearly, some BA investors cheered the DoD/China news. What gives?
The first and most obvious reason why Boeing is down today is because it was up yesterday. Any positivity about Boeing can’t last longer than a few hours, it seems. And like I said with the Ryanair rant-fest, BA is everybody’s whipping boy these days.
But the other reason why BA sank lower today is because, as positive analysts might be about the return of air traffic, travelers are only half the equation for Boeing. Airlines have quite a bit to do with how soon Boeing can take off from here. Oh yeah, they exist.
And as the analysts at Bernstein put it: “The story is not totally clean.”
We’re in a spot where airlines are dealing with increasing air traffic and need new planes … but they’re still facing a balance sheet disaster — some airlines worse than others. That kinda happens when you spend the pandemic retiring older planes and then selling others for quick cash.
Airlines will continue to try to upgrade and update their fleets while also cutting debt and minimizing cash burn. You throw in a little interest rate worrying and your typical inflation concerns, and financing a bunch of new planes suddenly gets a bit trickier.
Such is the balancing act airlines must play now. They will need Boeing for more planes to keep up with increasing air traffic — this much is true.
Thing is, Boeing’s found itself in the same holding pattern many a time before. Sent airborne by uplifting news and dashing back down into the tarmac when Negative Nancies chime in. Don’t believe me? Back on November 18, 2020 — before Great Stuff Picks even recommended the stock — we said:
Sounds familiar, no? With new clearance (hopefully) coming soon in China, the company can ramp up production again, deliver more of its existing inventory to the airlines and keep on keeping on.
Boeing’s been here before. We’ve been here before as BA investors. Boeing will be OK. (We’ll be OK too, for what it’s worth.)
Domestic airlines will figure out what the heck to do with their fleets. And getting the 737 MAX back airborne in China would do wonders on Boeing’s international sales front.
So … same as it ever was?
Same as it ever was, Great Ones. The bottom line you need to remember, especially if you’re holding BA is this: Boeing can and will take us high enough … eventually.
The variable in question these days is less about regulatory holdups with the 737 MAX (the 787 Dreamliner we’ll get to another day) and more about airlines ponying up enough cash to buy, buy, buy.
As such, today’s minute drop in BA stock is nothing to worry or write home about. If anything, the market just offered you yet another opportunity to snatch up BA stock on the cheap. Lucky you!
That said, you should write home to us here in the inbox. Let me know if you’re saying goodnight to holding BA, or if you’d live and die for the OG planemaker over at GreatStuffToday@BanyanHill.com.
Editor’s Note: Biggest Investment Opportunity Since The Internet Boom?
Research suggests that 916 of the Fortune 1000 companies are rushing to invest in the biggest tech opportunity of this century.
Ian King calls this technology “Digitarium.” Right now, hardly anyone knows about this trend, but mark my words: In just a few short years, Digitarium will become as common as the internet.
And there’s one small company in California at the center of it all.
I’ve always wondered what the “beyond” part of Bed Bath & Beyond (Nasdaq: BBBY) stood for, and now we know: beyond-poor earnings.
BBBY investors woke up with a migraine this morning after the company slashed both its revenue and earnings projections for the rest of the year, following disappointing fiscal second-quarter results.
The big-box behemoth reported a profit of $0.04 per share, missing analysts’ expectations of a $0.52 per-share profit. Sales? Also a letdown — revenue came in at $1.99 billion versus the $2.06 billion that Wall Street anticipated.
But where did things go so horribly wrong over at Bed Bath & Beyond?
I’m glad you asked! According to company execs, this latest earnings misfire can all be blamed on COVID-19-induced supply chain issues … and it definitely has nothing to do with its wildly overpriced inventory.
But wait! According to CEO Mark Tritton, this latest earnings miss isn’t something that Wall Street should worry about long term: “While results this quarter were below expectations, we remain confident in our multiyear transformation.”
I mean, what else is Tritton going to say? Business is down because no one wants to pay $50 for a shower caddy that Target sells for half the price? Nah… It’s much easier to blame Wall Street’s favorite scapegoat: COVID-19. At least, that’s Bed Bath & Beyond’s story … and it’s sticking to it.
There are plenty of reasons why CarMax (NYSE: KMX) made it onto our shortlist of Great Stuff Picks: No-pressure car searching, no hidden fees, an impressive omnichannel that makes it easy to buy cars online as well as in person. The list goes on.
Unfortunately, come earnings season, Wall Street’s expectations are the only thing that really matter. And this quarter, Wall Street didn’t get the news it wanted despite CarMax’s strong sales growth. Here’s a quick rundown of CarMax’s recent performance:
- Net revenue came in at $8 billion, up 48.7% compared to this time last year.
- Wholesale units increased 41.4% to 188,098 vehicles, also up from the year prior.
- Used-car sales increased 6.7%, up from 6.2% a year ago.
Well then, what gives? All that sounds pretty good to me!
As it should. The real sticking point were those pesky per-share earnings. Wall Street wanted earnings of $1.87 a share, and instead, it got $1.72 per share. So, weak-handed KMX investors had a fit and threw the baby out with the bathwater.
But here’s the thing: People are already hooked on the haggle-free car-buying experience that companies like CarMax and Carvana (NYSE: CVNA) provide. That was true before the COVID-19 pandemic, and it will remain true once life gets back to normal … whenever that is.
No offense to any of you used-car salesmen (salespeople?) out there, but I’ll scour the onlines for a new car any day of the week over traipsing through a labyrinthian car lot. And no, I will not upgrade to the all-weather floor mats, thank you very much.
We get it. You like CarMax. Get to the point.
The point is this: Any of you Great Ones looking to add KMX stock to your portfolio can view today’s 10% stock decline as a buying opportunity. If you already own CarMax, keep holding. How’s that for brevity?
The billionaire space race will undoubtedly heat up again now that Sir Richard Branson’s Virgin Galactic (NYSE: SPCE) has been cleared for takeoff by the Federal Aviation Administration (FAA).
If you haven’t kept up with Branson’s almost-a-spaceflight company, Virgin Galactic found itself in hot water with the FAA back on July 11 after its Unity 22 rocket veered off course in its final descent back down to Earth.
The problem wasn’t so much the deviation itself — you try slinging a 15,800-pound rocket into “space” and see if it sticks a perfect landing — but rather that Virgin Galactic failed to report said deviation to the FAA.
It’s kinda like when one of your kids swears they didn’t draw on the bathroom wall in permanent marker … even though they’ve got black ink smudges all over their hands and clothes. Same maturity level, very different repercussions.
But after being grounded for the better part of a month, Virgin Galactic made peace with the FAA and promised to provide “real-time mission notifications” during future flights. Because somehow that wasn’t a requirement in the first place…
Anyway, SPCE investors rejoiced over the news that their beloved Branson spacecrafts could take to the stars once more. Virgin Galactic stock rocketed 12% higher today, proving once again that investor sentiment remains the No. 1 mover of stock prices — and not things like future profitability or revenue growth.
As we pointed out back in May, Virgin Galactic already has 600 reservations lined up from wannabe astronauts eager to see space. But each of those reservations is already paid for … so where is the future revenue supposed to come from? Until that profitability is accounted for, we’ll continue giving Virgin Galactic a wide berth.
Electric pickup truck maker Lordstown Motors (Nasdaq: RIDE) showed signs of life this morning after rumors circulated that Taiwan’s Foxconn Technology Group might acquire its sole Ohio-based electric vehicle (EV) factory.
The buyout is a boon to unlucky Lordstown, which is still struggling to raise enough cash to produce its first all-electric pickup truck, the “Endurance.”
Ah yes, here comes a witty Lordstown joke about the company lacking the endurance to make the Endurance.
You know us too well. Putting aside Lordstown’s recent financial troubles, the company’s also faced scrutiny from the SEC over its summertime SPAC merger with blank check company DiamondPeak Holding Corp.
Apparently, ex-CEO Steve Burns lied about how many orders Lordstown received for the Endurance before going public, as well as where those orders came from. Not great, Bob!
While Foxconn’s buyout may help Lordstown’s lackeys in the interim, there’s no telling whether the move will be enough to save Lordstown from the gallows. So if rising RIDE shares piqued your interest this morning, keep one hand on the emergency brake and prepare for a quick getaway.
In other EV news … the surge in EV demand is also creating a surge in the materials critical to having these EVs come off the assembly line.
There’s only one company in the entire Western Hemisphere that supplies this critical material on such a large scale. And as EVs take over roadways all across America … they will rely on this material for future success.
And after you’ve gone and checked that out, why not drop us a line in the ol’ inbox-a-roo? You might just find your email right here tomorrow afternoon for Friday Feedback!
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Until next time, stay Great!