Analysts stayed bullish on Boeing and Spirit AeroSystems Monday, calling the stock tumble that followed the Federal Aviation Administration's grounding of Boeing 737 Max 9 aircraft a buy opportunity.
The FAA grounded the 737 Max models on Saturday, after an emergency depressurization incident forced an emergency landing of an Alaska Airlines jet on Friday. One passenger reportedly required hospitalization. News reports said the airline had experienced multiple previous pressurization warnings from the jet in question, and had consequently removed it from long-distance routes to Hawaii, in case it might require an emergency landing.
Analysts did not view the event as a serious threat to the companies or their stocks.
BA, SPR Still Buys
"Investors should add original equipment manufacturer stocks Boeing, Howmet Aerospace, Spirit AeroSystems if weak, as we do not expect this temporary grounding to result in a further widespread issue," Baird analyst Peter Arment wrote in a Monday research note. Although quality control "remains an overhang for Boeing and Spirit," Arment expects inspections on the roughly 215 737 Max-9 models in service globally to be completed within days. Baird has an outperform rating for Boeing stock, HWM and SPR.
JPMorgan maintained an overweight rating and a $270 price target following the incident. But analyst Seth Seifman sees a "range of potential outcomes" as the "extent of the setback is not yet clear." The FAA's requirement for 4 to 8 hour inspections doesn't seem like a major delay to returning to service, Seifman wrote in a Monday research note. However, a key question remains on how regulators address the incident. "One thing we can say, however, is that it is imperative for Spirit and Boeing to shore up the quality of production," he said.
Citi analyst Jason Gursky doubts the 737 issue will remain a long-term problem for Boeing, according to a note to investors Monday. He contends it's likely a manufacturing problem with the aircraft in particular, rather than a broader design defect. Gursky notes the 737-9 has been flying with plugged doors since the late 1990s and the MAX has been in service since 2015 without a similar incident. The problem is likely isolated to the 737-9, as it's the only 737 model configured for a plugged door, Gursky added. Citi kept a buy rating on BA stock.
Boeing Stock
News of loose bolts discovered during a United Airlines 737 Max 8 inspection sent Boeing stock back to an 8% loss Monday afternoon, after paring losses earlier. The move killed a Boeing breakout from a cup base and halted at 10-week support, but still triggered the automatic sell rule.
Spirit AeroSystems stock dived 16% in early trade, then pared back to a 5% loss. News from the United Airlines inspections sent shares back to a 11% loss.
HWM stock is trading near record highs at the top of a buy zone for a 17-week consolidation.
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