Boeing (BA) Stock: Why It’s Seeing So Much Red

If you are looking for a stock that has taken the full downside force of the market, look no further than The Boeing Company (NYSE: BA). The huge move downwards in price that the multinational aerospace company experienced over the last month was both dramatic and unprecedented for a stock that was previously a renowned American defense stock. Investors have been on a wild ride if they were long Boeing at the start of the year, as shares of BA have tumbled to a nearly 50% decline from ~$330 per share to $126.42 at the time of this writing. The stock dead-cat bounced off of its 52-week low of $89 dollars back to $180 but has since started moving back down.

Boeing was once considered a staple in many long-term investment portfolios, but the mighty have fallen. Sure, current market conditions have not done Boeing any favors, but the sharp decline in share price was driven by several other factors as well. Let’s take a deeper look at some of the main drivers behind the decline of Boeing’s stock price.

Mired in Controversy Before the Pandemic

If you are trying to understand how the stock of the largest producer of commercial aircraft in the world lost half of its value in such a short timespan, it helps to understand what was happening to Boeing prior to the recent market drop. Boeing was actually mired in controversy before the pandemic even started affecting the stock market. The company faced severe scrutiny for their handling of the 737 Max jet crashes.

After 2 deadly crashes that led to hundreds of people losing their lives, investigators discovered that Boeing was responsible for the malfunction of the automated flight control system on the plane that led to the crashes. This resulted in Boeing halting all production on the best-selling 737 Max aircraft, which certainly has not helped the company from a financial perspective. As more and more information came to light about the internal handling of the issue, it ultimately resulted in the company forcing out their former CEO and replacing him with former General Electric executive David Calhoun. This type of internal turmoil and controversy is exactly what investors don’t like to see, which is part of the reason why we’ve seen such a dramatic downturn for this once-thriving company.

Air Travel Halted

If things weren’t bad enough for Boeing, they got a lot worse when the Coronavirus pandemic began disrupting the entire travel industry. The demand for air travel has declined steeply with the spread of the Coronavirus, which has been a major driver of the decline in BA share price. The month of March was one of the worst months in market history, with the airline and travel industries experiencing the full force of the downside. People just aren’t flying in commercial planes at the moment, and it will be interesting to see how the air travel industry is affected by the pandemic in the long term. For now, orders for new Boeing planes are increasingly being put on hold which is certainly having a negative effect on the share price.

Request for Federal Aid & Suspended Dividend

It isn’t surprising that Boeing’s business has suffered as a result of the issues mentioned above, but when Boeing requested $60 billion in federal financial aid last week, the company’s financial troubles truly came into focus. Boeing is not in the best position financially, and they even had to cut their dividend payments to shareholders. Combine that with the fact that Boeing orders were zero in January for the first time since 1962 and you can start to understand why the share price is so low. These developments do not bode well for the short-term future of Boeing, which has led many investors to liquidate their positions.

Although Boeing stock bounced off of its 52-week lows, the potential for more financial woes is certainly a possibility going forward. The company is in real trouble and faces an incredible amount of uncertainty going forward. Rumors of a buyout are running rampant since the company’s current CEO stated that they will not accept a government-assisted bailout package. All of these negative headlines have contributed to the downside for BA stock. It will be truly fascinating to watch what unfolds with the company in the coming months.