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Education Series: Single-Stock ETPs

Boeing’s Rough Landing

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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

It has been a rough ride for Boeing shareholders, the stock price is down 32% over the last year as its price has experienced some strong headwinds this year.

One of the main issues the company has been facing is consistently missing expectations on earnings day (indicated by the blue dotted circles) and causing its shares price to close red on the day as a result. This in combination with nervous and volatile markets screaming sell whenever companies fail to deliver on their promises lead to another investor shock. After reporting yet another major miss across the board: third-quarter revenue came at $15.96 billion (vs Exp. $17.74 billion), while EPS -$6.18 (vs. Exp. 0.07), resulting in shares plunging -9% on the day.

Source: TradingView

Inflation surges causing higher labour instability, input costs and hefty penalties for faulty planes along with production delays due to supply chain issues have not only reduced profitability but also caused some serious reputational damage to the US biggest aircraft manufacturer.

The company recorded a whopping $2.8 billion in charges from its defense business as cost overruns on its aerial tanker, Air Force One and other military contracts caused a huge dent Boeing’s earnings. Net income has been consistently negative as Boeing has already recorded a $0.66 billion charge in the first quarter of 2022 related to the Air Force One program’s higher supplier costs, higher costs to finalize certain technical requirements and schedule delays.

Source: YCharts

Desperately trying to salvage its share price from nose-diving any further, Boeing has switched investors’ focus from its net profit to free cash flow, which did improve considerably in Q3’2022. The second good news is that year to date, the aircraft manufacturer has delivered 328 airplanes compared to 241 in the first nine months of 2021. So far this year, Boeing is 77 deliveries ahead of last year’s totals. However, demand for commercial flights and planes, especially the 737 MAX, is very strong after the Covid-19 pandemic, but production is failing to keep up with it.

The company has been trying to cover all its problems by overpromising and underdelivering on its delivery schedule, but so far have been terribly behind. Recently it cut its deliveries target for single-aisle aircraft to 375 from around 500 at the start of the year to “the low 400s” in the middle of the year only to cause more investors and client frustration, further damaging its tarnished reputation.

Source: Company Website

On top of that, the company has a huge backlog, which was reduced by lots of cancelations (ASC 606 Adjustment) for their most popular commercial product the 737, thanks to an endless number of problems that have been surrounding it. Mainly two crashes that killed 346 people, due to Boeing’s horrible engineering mistakes. Leading to criticism that it focused too much on returns rather than safety and innovation.

To make matters worse, the unpredictable and depressing macro picture as inflation remains elevated, causing the Fed to continue with its rate hikes, more specifically a forth 75 basis points increase in November, in combination with continued geopolitical tension between US and China could only add more headwinds to the battered US plane manufacturer stock price.

Clear sky or more stormy weather ahead for Boeing’s share price?

In the short term, a lot of bad news are priced in, however, turnarounds will take time, and the stormy macro outlook, will not help. The company needs to come up with a reliable schedule for its deliveries before investors start taking it seriously again. Until then, quite possibly a drop under $130 to high or mid $120s in the short term.

Source: TradingView

Active traders looking to gain exposure may use our -1x Short Boeing ETP to capture expected declines.

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

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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.

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