In our posting of March 22, 2020, we said the following:
“Since the low in the stock market on March 9, 2009, Boeing (BA), (as of March 20, 2020) has gained approximately +206%. In the same period of time (March 9, 2009-March 20, 2020), the Dow Jones Industrial Average has increased +192%.”
If we were to match the performance of Boeing to that of the Dow Jones Industrial Average from the 2009 low to the April 3, 2020 close, Boeing would be trading at approximately $65.04. However, we already know that Boeing has been booking future sales to current earnings. This basically means that there were no earnings in the prior years.
The details of Boeing’s accounting is outlined in our March 23, 2020 posting titled “Boeing’s Accounting: Legal but Questionable.”
Numbers to Watch
As we continue to say, price reflects fundamental and fundamentals reflect price. In the chart below, which includes the last remaining downside targets, we have highlighted the fact that in the prior recessionary period from 1999 to 2002, Boeing reached a low of $25.06.
In the recovering from the low in 2002/2003, Boeing achieved a high of $107.23 and then fell to a low of $29.51. It is not necessary for Boeing to actually replicate the move of going back to the prior bear market low of 2002. However, we should not be surprised if Boeing were to go to the prior low of $29.51.
For the time being, we will attempt an unusual approach to using the Speed Resistance Lines. Typically, our downside targets are based on the most recent all-time high. In this case, that would mean basing the current downside targets on the $440.62 price. However, the current decline has been so disastrous that we’re going to utilized the 2015 peak price of $158.31 as the basis of our downside targets.
Below is the updated downside targets for Boeing (BA) based on the peak price that was set on February 20, 2015.
The downside targets based on the 2015 peak at $158.31 are:
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$110.31 (conservative)
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$83.54 (mid-range)
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$52.77 (extreme)
Remember, the decline in Boeing started in early 2019. Additionally, Boeing began trading in a range starting in early 2018. For this reason, the idea of connecting the current decline with the coronavirus is generally a mistake.
That Boeing has managed to achieve the downside targets of a prior peak ($110.31) is astounding and speaks to the extreme low that it needs to achieve relative to the Dow Jones Industrial Average.
Summary
The current earnings were an illusion and should easily bring Boeing to $83.54, $65.04, $52.77, and possibly to $29.51.