Boeing's in Trouble – and Now's the Perfect Time to Ask Whether You Should Buy, Sell, or Hold

Shah Gilani

The Boeing Co. (NYSE: BA) is in trouble.

If it doesn't get its troubled 737 Max planes certified by U.S. and international regulators and in the air by this summer, its dwindling cash and negative cash flow from operations will implode its stock.

But, unfortunately for the company, the 787 Max isn't Boeing's only aircraft problem.

Regulators are investigating the company's 787 Dreamliner over whistleblower claims that its oxygen systems don't work, that managers let defective parts get through quality control checks, and that, when workers installed planes' floorboards, they let three-inch-long razor-sharp shards of titanium fall the plane's sensitive electronic equipment.

But also, despite all its problems, Boeing isn't going out of business. It's too important to the American military and the U.S. economy.

But that doesn't mean it's not too big to fail (in terms of its stock price).

Investors should be asking themselves what to do with Boeing shares at a time like now: buy, sell, or hold?

Here's what you need to do with the stock no matter what happens next.

A Duopoly Between the U.S. and E.U.

Boeing, headquartered in Chicago, Illinois, and Airbus SE (OTCMKTS: EADSY) (Boeing's only real competitor), a European consortium headquartered in Linden, Netherlands, together control 99% of the world's commercial airplane manufacturing.

In 2018, Boeing edged out Airbus by delivering 20 more planes to become the "largest" aircraft producer in the world. That's already changed. Airbus, whose operational head offices are in Toulouse, France, now delivers a lot more planes than Boeing.

The fact that Boeing and Airbus are a duopoly, two essential monopolies in the United States and the European Union, who compete head to head, means they are both too big to fail.

Boeing is too important to the U.S. military and America's economy to ever disappear.

While declaring bankruptcy is a remote possibility, if Boeing couldn't service its debt and lenders weren't willing to refinance, before all the disruption that would cause, the U.S. government would step in with a bailout.

That's also only a remote possibility.

If Boeing's financials sink so low it's on the edge of financial insolvency, if its stock falls enough, it will become an acquisition target for a big private equity company. Or, more likely, it will get a huge cash infusion from a big bank or a consortium of banks or from mega-investor Warren Buffett.

I'm on record, on Fox Business Network's "Varney & Co.," speculating that Warren Buffett will step in and, for a handful of warrants, pony up at least $10 billion to carry Boeing through its times of trouble.

Based on that supposition, I want to own Boeing stock. It's just a matter of where for me.

Because Boeing's facing a cash crisis, it has around $10 billion on its books, but its operating cash flow now annualizes at -$2.5 billion, its levered free cash flow annualizes at -$3.3 billion, and it has an annual dividend cost of $4,626,133,800.

Something's got to give.

Maybe it will be the dividend. It could be cut since the company has to borrow to pay it now.

That would hit the stock.

Boeing stock is only up a fraction today, despite the market soaring.

At close to $317 a share, it's only $14.28 above its 52-week low of $302.72.

Buy, Sell, or Hold? Here's What You Need to Do with Boeing Stock

Shah Gilani

About the Author

Browse Shah's articles | View Shah's research services

Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.

The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.

Shah founded a second hedge fund in 1999, which he ran until 2003.

Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.

Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.

Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.

… Read full bio