Boeing (NYSE:BA) On Watch After 737 MAX Takes Flight

A Long Road For Boeing

Boeing (NYSE:BA) is going on watch today as it’s best-selling plane returns to the skies. The first commercial flight in the U.S. resumed today with flights from American Airlines. The first flight is between New York and Miami with the return flight projected to be full. Because some passengers are still skeptical, American Airlines and others using the 737-MAX will allow them to change flights for free but it is unclear how long that will last.

American Airlines is projecting to have at least 90 of its daily flights using the 737-MAX by the end of February. United Airlines, Southwest, and Alaska Airlines are all expected to resume use of the MAX during the first quarter of the new year. Internationally, Mexico cleared the jet for use last month, Canada is expected to clear it in January, and the EU is on track for clearance during the Q1 period.

The Analysts Are Warming Up To This Two-Pronged Rebound

The analysts are warming up to Boeing and what is fast becoming a two-pronged rebound. Not only is the 737-MAX scandal largely behind the company but the economic rebound is just ahead. With the COVID-19 vaccines making their way through the system we can expect to see a more robust and sustained economic reopening than what we’ve already seen. That puts the entire travel and leisure industry in the perfect position for revenue and earnings rebounds, not just Boeing.

The average analyst’s rating is still a Hold/Neutral but the sentiment is warming. Over the past 90 days, the stock has had 4 of its bearish/neutral ratings turn bullish with a notable increase in the consensus target price. There are now 13 bulls out of a total of 30 ratings with only 7 bears giving the stock a definite bullish bias. The consensus price target is up 720 basis points to $223.50 and likely to rise further in the coming weeks. The most recent analyst notes, the ones that have come out since the last earnings report, imply a target closer to $275 or about 27% upside.

The Airlines Are Already Queuing Up For New 737-MAX Jets

As if the resumption of 737-MAX flights wasn’t enough to lift shares of Boeing there are the new orders to consider. The company reports more than 100 new orders for jets in December alone with more expected to come. The largest is from Alaska Airlines which ordered 68 new MAX jets with a possible 52 more by mid-decade. The first 13 will be delivered in 2021 with 30 more in 2022 and the remainder in 2023.

"Alaska Airlines says the 737 – equipped with new, more fuel-efficient engines and improved aerodynamics – will use 20% less fuel and reduce emissions by 20% per seat compared to airplanes it replaces. The airline will configure the jet with 178 seats in a three-class configuration. The plane can fly 3,550 nautical miles, about 600 miles more than its predecessor. This additional capability will allow airlines to offer new and more direct routes to passengers."

The Technical Outlook: Boeing Is On The Cusp Of A Major Reversal

Shares of Boeing have been trading in a range near the March 2020 lows but may be ready to break out. The FAA’s approval of the 737-MAX and its return to service sparked a strong rally that has already tested the top of the range and now consolidating for another try. The indicators are bearish right now but there is a caveat. Market conditions are returning to oversold while the stock remains elevated and above the short-term moving average. This is consistent with a new, higher, support level and a resumption of the recent trend. The key level for investors and traders to watch is the $233.75 level. If the market can get above there, shares of Boeing will probably move up to retest the pre-COVID high near $350 or about 50% upside.