The Contrarian Blog

Turbulence Could Be on the Horizon for Boeing

by Elizabeth Harrow 3/23/2012 2:20 PM
Stocks quoted in this article:
Publication: ""
Publication title: "Why Have Boeing Shares Stalled?"
Publication Date: 3/19/2012
Brief Summary:

This article takes a skeptical look at The Boeing Company (BA), with the author observing that an improving fundamental backdrop -- including ramped-up production, a new labor contract, and support from the Obama administration -- "has done little to lift Boeing shares." So far in 2012, the stock has lagged both the Dow Jones Industrial Average (DJIA), of which it is a member, and the broader aerospace and defense sector. BA's underperformance is attributed in part to lingering concerns over 787 production, particularly as uncertainty remains regarding industry demand for new aircraft.

Contrarian Takeaway:

BA has definitely underwhelmed with its price action over the past year, with the stock managing a barely perceptible gain of 1.6% over the past 52 weeks. Since April 2010, in fact, the equity's rally attempts have consistently fizzled in the $75-$80 region. With BA once again in the process of pulling back from this technical ceiling, it seems that resistance here is firmly intact.

Nevertheless, Wall Street remains surprisingly upbeat toward this sluggish aerospace issue. Zacks tallies no fewer than 16 "buy" or better ratings from brokerage firms, compared to just six "holds" and one "strong sell." Likewise, short interest accounts for a slim 1.5% of the equity's float, and BA's Schaeffer's put/call open interest ratio (SOIR) of 0.92 registers in the 44th percentile of its annual range -- confirming a relatively complacent attitude among short-term speculators.

With the shares retreating from long-term resistance, BA could be vulnerable to an unwinding of bullish sentiment during the near term. A capitulation by any of the stock's fans could create a headwind for BA going forward.

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