fbpx

Education Series: Single-Stock ETPs

Boeing: A Steady Climb into Blue Skies

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at

When it comes to the aerospace sector, retail investors can expect a duopoly in the civilian aircraft manufacturing space. Boeing is the oldest and arguably the most historic company to occupy this space. However, the dearth of solid facts or a steady line of innovative products might make some investors think that this is not an exciting space to invest into.

However, this isn’t necessarily the case. In this article, we go over the latest fundamental growth factors that will shape Boeing’s future as it continues to grow.

Spreading Its Wings

Boeing finds itself at a crossroads today: production of its vaunted 737 Max – which sold for between $100-135 million apiece in 2020 – remain paused for the 20th consecutive month after airlines operating the MAX variants grounded most of them following two fatal crashes. The root cause has been determined to be electrical problems that require extensive retrofits be made. On the other hand, the Max’s wide-body counterpart, the 787 Dreamliner – which sold for between $240-300 million apiece in 2020 – resumed deliveries in March this year, following a 5-month pause due to a different manufacturing flaw.

Until the Max’s production hit the roadmap, a number of airlines in Europe – which traditionally favour Airbus over Boeing – had been positively inclined towards acquiring Boeing’s narrow-body Max. With the pandemic grinding international travel to a shadow of its former self, both Boeing and Airbus have witnessed outright cancellation or downgrading of placed “confirmed” orders into “options” (a right to buy in the future but not an obligation).

In terms of products, the Max has a range of 6,000-7,000 kilometres while the Dreamliner has a range of 13,000-14,500 kilometres. Problems with the Max have created opportunities for the Airbus A321 family of jets to take orders away from Boeing. U.S.-based JetBlue chose the latter for its short-distance transatlantic service. American Airlines and United Airlines – two of the largest customers Boeing had serviced in its past – have also ordered Airbus aircraft to modernise their fleets.

Boeing’s signature wide-body 777 family – with a range of 15,000-17,000 kilometres, is the most-produced Boeing wide-body passenger jet in its history. Its latest variant, the 777X, has been suffering from lack of orders and cost overruns after Lufthansa, Emirates, Qatar Airways, and Etihad Airways formally committed to buying this latest variant. On May 17 of this year, Emirates expressed its desire to convert at least a portion of its order from the 777X to the cheaper and smaller Dreamliner instead. </p.

Boeing has 4,045 planes on backorder, close to 3,200 of them for Max jets and 433 for Dreamliners as of the end of April. However, it is currently dwarfed by the number of deliveries placed by Airbus:

Flight Path Ahead

It bears noting that backorders for Boeing’s Max variants makes it evenly matched against rival Airbus. To bridge the yawning gap between the Max and the Dreamliner – which Airbus has been exploiting for quite some time now – Boeing had announced the revival of its plan for a new jet after scrapping an earlier midsize aircraft concept last year.

To be fair, this gap was earlier plugged by the 757 and 767 families of jets which were introduced nearly 40 years ago. Most of these jets were delivered to passenger airlines before 2002. Since Boeing had then moved on to long-haul jets, this space had fallen vacant and prey to Airbus, which serviced the budget airlines operating these routes. Airbus’ upcoming A321XLR – which has already captured a substantial chunk of the 757 and 767 replacement business – is only slightly larger than the 737 MAX 10 but has a range of 8,700 kilometres (enough to serve the U.S.-Brazil, Europe-India, Asia-Australia and some transatlantic routes as an example).

A purpose-built Boeing jet bigger than the Airbus A321XLR and with more range would be a superior choice for an airline looking to replace its 767s and capturing growth opportunities on mid-range routes that are traditionally filled by Airbus jets. However, there are three problems with this route:

  • Developing a new jet as well as a new production system from scratch are both expensive undertakings for the company
  • A newly-designed Boeing jet would likely enter service in 2028 or 2029 in the best-case scenario. Airbus is busily plugging gaps that are apparent right now with the A321 scheduled to be delivered in 2023, which in turn implies reduced sale opportunities for Boeing;
  • Given the high cost of producing a new design from scratch, the new Boeing jet will likely be very expensive.

A means of capturing and retaining the mid-range gap would likely be by cutting the selling price. In this regard, Boeing has a distinctive advantage in terms of net cash:

In Conclusion

It is a testament to Boeing’s strong brand appeal that, despite these issues, it continues to have more orders than cancellations month after month. While the Max’s production is indeed halted right now, rectifying existing issues would likely lead to an even bigger boom in orders.

Boeing (NYSE: BA) is a constituent of the S&P 500 (SPX). Since the year began, the company significantly outperformed the index until recent corrections triggered by the delays in rectifying the faults found in the Max:

A shrewd investor would likely be able to formulate a strategy that delivers the best value by following news around Boeing’s successes in plugging the faults that has caused its flagship jet so much woe as well as Airbus’ success in its budget airline strategy.

References:

  1. From Start To Finish: How The Boeing 787 Is Made, Simple Flying
  2. Weekly COVID-19 aviation update, Cirium
  3. Airbus’s small jet bet gives it a big edge on Boeing, Financial Times

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

Related Posts

Search

Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt
Filter by Categories
AAPL
AMD
AMZN
BA
BABA
BARC
BP
C
CRM
Deutsche Videos
Education
ETPs
FB
Featured
GOOG
GS
HSBC
HSBC
In the press
Insight
Insights
JPM
Market Insights
MSFT
MU
NFLX
NVDA
PYPL
RDS
Research
Research
SHOP
SQ
TSLA
TWTR
UBER
Uncategorized
Uncategorized
Uncategorized
V
VOD
Websim
ZM
Search
Generic filters
Exact matches only
Search in title
Search in content
Search in excerpt
Filter by Categories
AAPL
AMD
AMZN
BA
BABA
BARC
BP
C
CRM
Deutsche Videos
Education
ETPs
FB
Featured
GOOG
GS
HSBC
HSBC
In the press
Insight
Insights
JPM
Market Insights
MSFT
MU
NFLX
NVDA
PYPL
RDS
Research
Research
SHOP
SQ
TSLA
TWTR
UBER
Uncategorized
Uncategorized
Uncategorized
V
VOD
Websim
ZM

Sandeep Rao

Research

Sandeep joined Leverage Shares in September 2020. He leads research on existing and new product lines, asset classes, and strategies, with special emphasis on analysis of recent events and developments.

Sandeep has longstanding experience with financial markets. Starting with a Chicago-based hedge fund as a financial engineer, his career has spanned a variety of domains and organizations over a course of 8 years – from Barclays Capital’s Prime Services Division to (most recently) Nasdaq’s Index Research Team.

Sandeep holds an M.S. in Finance as well as an MBA from Illinois Institute of Technology Chicago.

Violeta Todorova

Senior Research

Violeta joined Leverage Shares in September 2022. She is responsible for conducting technical analysis, macro and equity research, providing valuable insights to help shape investment strategies for clients.

Prior to joining LS, Violeta worked at several high-profile investment firms in Australia, such as Tollhurst and Morgans Financial where she spent the past 12 years of her career.

Violeta is a certified market technician from the Australian Technical Analysts Association and holds a Post Graduate Diploma of Applied Finance and Investment from Kaplan Professional (FINSIA), Australia, where she was a lecturer for a number of years.

Julian Manoilov

Senior Analyst

Julian joined Leverage Shares in 2018 as part of the company’s premier expansion in Eastern Europe. He is responsible for web content and raising brand awareness.

Julian has been academically involved with economics, psychology, sociology, European politics & linguistics. He has experience in business development and marketing through business ventures of his own.

For Julian, Leverage Shares is an innovator in the field of finance & fintech, and he always looks forward with excitement to share the next big news with investors in the UK & Europe.

Oktay Kavrak

Director

Oktay joined Leverage Shares in late 2019. He is responsible for driving business growth by maintaining key relationships and developing sales activity across English-speaking markets.

He joined LS from UniCredit, where he was a corporate relationship manager for multinationals. His previous experience is in corporate finance and fund administration at firms like IBM Bulgaria and DeGiro / FundShare.

Oktay holds a BA in Finance & Accounting and a post-graduate certificate in Entrepreneurship from Babson College. He is also a CFA charterholder.

Welcome to Leverage Shares

Terms and Conditions

Notice

If you are not classified as an institutional investor, you will be categorised as a private/retail investor. At this time, we cannot send communications directly to private/retail investors. You are welcome to view the contents of this website.

If you are an ‘Institutional investor’, you affirm either that you are a Per Se Professional Client, or that you wish to be treated as an Eligible Counterparty Client, both as defined under the Markets in Financial Instruments Directive, or an equivalent in a jurisdiction outside the European Economic Area.

Risk Warnings

The value of an investment in ETPs may go down as well as up and past performance is not a reliable indicator of future performance. Trading in ETPs may not be suitable for all types of investor as they carry a high degree of risk. You may lose all of your initial investment. Only speculate with money you can afford to lose. Changes in exchange rates may also cause your investment to go up or down in value. Tax laws may be subject to change. Please ensure that you fully understand the risks involved. If in any doubt, please seek independent financial advice. Investors should refer to the section entitled “Risk Factors” in the relevant prospectus for further details of these and other risks associated with an investment in the securities offered by the Issuer.

This website is provided for your general information only and does not constitute investment advice or an offer to sell or the solicitation of an offer to buy any investment.

Nothing on this website is advice on the merits of any product or investment, nothing constitutes investment, legal, tax or any other advice nor is it to be relied on in making an investment decision. Prospective investors should obtain independent investment advice and inform themselves as to applicable legal requirements, exchange control regulations and taxes in their jurisdiction.

This website complies with the regulatory requirements of the United Kingdom. There may be laws in your country of nationality or residence or in the country from which you access this website which restrict the extent to which the website may be made available to you.

United States Visitors

The information provided on this site is not directed to any United States person or any person in the United States, any state thereof, or any of its territories or possessions.

Persons accessing this website in the European Economic Area

Access to this site is restricted to Non-U.S. Persons outside the United States within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”). Each person accessing this site, by so doing, acknowledges that: (1) it is not a U.S. person (within the meaning of Regulation S under the Securities Act) and is located outside the U.S. (within the meaning of Regulation S under the Securities Act); and (2) any securities described herein (A) have not been and will not be registered under the Securities Act or with any securities regulatory authority of any state or other jurisdiction and (B) may not be offered, sold, pledged or otherwise transferred except to persons outside the U.S. in accordance with Regulation S under the Securities Act pursuant to the terms of such securities. None of the funds on this website are registered under the United States Investment Advisers Act of 1940, as amended (the “Advisers Act”).

Exclusion of Liability

Certain documents made available on the website have been prepared and issued by persons other than Leverage Shares Management Company. This includes any Prospectus document. Leverage Shares Management Company is not responsible in any way for the content of any such document. Except in those cases, the information on the website has been given in good faith and every effort has been made to ensure its accuracy. Nevertheless, Leverage Shares Management Company shall not be responsible for loss occasioned as a result of reliance placed on any part of the website and it makes no guarantee as to the accuracy of any information or content on the website. The description of any ETP Security referred to in this website is a general one. The terms and conditions applicable to investors will be set out in the Prospectus, available on the website and should be read prior to making any investment.

Leverage Investment

Leverage Shares exchange-traded products (ETPs) provide leveraged exposure and are only suitable for experienced investors with knowledge of the risks and potential benefits of leveraged investment strategies.

Cookies

Leverage Shares Management Company may collect data about your computer, including, where available, your IP address, operating system and browser type, for system administration and other similar purposes (click here for more information). These are statistical data about users’ browsing actions and patterns, and they do not identify any individual user of the website. This is achieved by the use of cookies. A cookie is a small file of letters and numbers that is put on your computer if you agree to accept it. By clicking ‘I agree’ below, you are consenting to the use of cookies as described here. These cookies allow you to be distinguished from other users of the website, which helps Leverage Shares Company provide you with a better experience when you browse the website and also allows the website to be improved from time to time. Please note that you can adjust your browser settings to delete or block cookies, but you may not be able to access parts of our website without them.

This website is maintained by Leverage Shares Management Company, which is a limited liability company and is incorporated in Ireland with registered offices at 2 Grand Canal Square, Grand Canal Harbour, Dublin 2. 

By clicking you agree to the Terms and Conditions displayed.