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A lot of investors would find recent headlines about The Boeing Co. (NYSE: BA) very confusing.
But we're not most people. Here at Strategic Tech Investor, we know the value of focusing on the long-term horizon.
And if ever there was a textbook example of this, it's Boeing.
On Nov. 19, the global leader announced a deal to sell up to 50 jetliners worth $5.9 billion to a Korean airline.
But the stock tanked that day, falling 4.5%. I believe this had to do with two main factors.
- The market has recently clipped the value of big-cap leaders.
- Boeing got a lot of bad press after an Oct. 29 fatal crash of one of its new 737s.
But today, I'm going to show you why you need to look beyond the bad press to see why Boeing will once again be a market-crushing stock.
Check it out…
A Tragic Crash
I want to clear one thing up right off the bat: I'm in no way making light of the Lion Air plane crash that killed 189 people when the Indonesian passenger jet crashed into the Java Sea 13 minutes after takeoff.
Turns out that discount carrier Lion Air had been flying Boeing's new 737-Max 8 for just two months. As you might expect – and what is scaring many on Wall Street – Boeing is facing wrongful-death lawsuits, with at least one already filed.
This fear is aggravated by the fact The Wall Street Journal reported that flawed sensor readings may have led to the crash. In some cases where the pilots are flying manually, the false reading means the plane's computers will try to push the plane down, even though the pilots are frantically trying to pull the plane up.
Investigators have said this is what they believe happened with this tragic plane crash.
But here's what everyone is missing… Despite this crash, the industry still has great faith in Boeing, and this new version of the 737 in particular.
A Very Large Order
I say that because the Nov. 19 order from Korean carrier Jeju Air was for 40 737-Max 8s, the very aircraft involved in the Indonesian crash. Boeing notes that this is the largest order ever received from a Korean low-cost carrier, adding the deal could include the sale of 10 more planes.
Again, I'm not making light of the crash. However, the 737 has been in service for decades. Data compiled by AirSafe.com shows that various versions of this model have been involved in 77 crashes since 1972.
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Most of those occurred overseas, where air travel is not as heavily regulated as it is here in the United States, and few involved a major number of fatalities.
More to the point, despite the negative publicity to Boeing when a crash occurs, the company has remained the world's largest maker of civilian jet aircraft, with a growing pipeline of orders – totaling trillions – going out for many years.
And Boeing is particularly well-suited for the future of air travel. See, with China as the leader, Asia is set to become the world's top travel spot.
EuroMonitor International says that by 2030, international arrivals will have risen by 1 billion. That would be on top of the expected 1.4 billion trips for this year.
By that time, China is expected to have overtaken France to become the world's top travel destination. For several years now, Boeing has been making a big push into China and the rest of Asia.
Every summer, Boeing releases an updated view of the long-term demand for its aircraft. It comes after deep discussions with key clients and a thorough analysis of economic trends.
In its latest forecast, Boeing boosted its outlook and now says that 41,030 planes, worth $6.1 trillion, will need to be built over the next two decades to meet demand.
Asia will by far be the largest market. Boeing forecasts that more than one-third of its planes will be built for use in that region. The roughly 16,050 aircraft to be delivered there are just 120 shy of the total for Europe and North America combined.
For Boeing, surging global demand, and the order backlog it creates, brings a pair of powerful strengths.
About the Author
Michael A. Robinson is one of the top financial analysts working today. His book "Overdrawn: The Bailout of American Savings" was a prescient look at the anatomy of the nation's S&L crisis, long before the word "bailout" became part of our daily lexicon. He's a Pulitzer Prize-nominated writer and reporter, lauded by the Columbia Journalism Review for his aggressive style. His 30-year track record as a leading tech analyst has garnered him rave reviews, too. Today he is the editor of the monthly tech investing newsletter Nova-X Report as well as Radical Technology Profits, where he covers truly radical technologies – ones that have the power to sweep across the globe and change the very fabric of our lives – and profit opportunities they give rise to. He also explores "what's next" in the tech investing world at Strategic Tech Investor.