Insights

Why Boeing Stock Is Still Falling

What happened
For six straight trading days, Boeing (NYSE: BA) stock has moved in only one direction: down. And I fear Thursday is going to be no different.
As trading begins to wind down for the day Thursday, shares of aerospace giant Boeing are down in the dumps once again — off 6.6% as of 2:55 p.m. ET. Two explanations for this fact suggest themselves.
Here’s an artist’s depiction of Boeing CST-100 Starliner docking with the International Space Station — but when will it happen in real life? Image source: Boeing.

So what
The first issue concerns Boeing’s flagship commercial aviation business. CNBC is reporting today that the rising cost of plane tickets is depressing demand for air travel, and that flight bookings dropped 17% in April as a result. Further up the supply chain, decreased demand for air travel has the potential to depress demand for new airplanes, which would obviously affect Boeing’s sales.  
That being said, rising ticket prices are more likely tied to rising oil prices than to anything Boeing has control over — so this is not really a problem that the company can be blamed for, or that it can fix. In time, travelers will adjust to the new reality that prices are higher, and I’d expect prices, and demand, to stabilize.
Now what
Of greater interest is the negative press Boeing is catching this week over a Reuters report on its “clash” with space stock supreme Aerojet Rocketdyne (NYSE: AJRD), which manufactures the propulsion system for Boeing’s CST-100 Starliner space capsule.
Last year, stuck valves on the Starliner’s steering jets forced Boeing to scrub a planned launch that would be a key milestone toward getting Starliner certified to carry astronauts to orbit. Boeing blames Aerojet for the mishap, citing design flaws. Aerojet says Boeing got the valves stuck itself, by using the wrong kind of cleaning chemicals — and Aerojet is refusing to redesign the system unless Boeing antes up more money for the work.  
You might think this is just a run-of-the-mill contract dispute, and one that will eventually be resolved by Boeing paying Aerojet some money, or suing Aerojet to fix the problem for free — but the stakes here are actually much higher, and much more time sensitive.
Boeing, you see, has been trying to get its CST-100 certified for human spaceflight for more than two years now, and so far unsuccessfully. If a planned rerun of its test flight on May 19 is delayed again — or fails! — because of a sticky valve, this would be a real disaster for Boeing’s space business, potentially forcing it to admit only SpaceX has the ability to put Americans in space for years to come.
It’s not too much of an overstatement to say that the fate of Boeing’s space program now hinges upon a single sticky valve — and unless it gets this problem solved in the next seven days, its stock could have even further to fall.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. –

What happened

For six straight trading days, Boeing (NYSE: BA) stock has moved in only one direction: down. And I fear Thursday is going to be no different.

As trading begins to wind down for the day Thursday, shares of aerospace giant Boeing are down in the dumps once again — off 6.6% as of 2:55 p.m. ET. Two explanations for this fact suggest themselves.

Here’s an artist’s depiction of Boeing CST-100 Starliner docking with the International Space Station — but when will it happen in real life? Image source: Boeing.

So what

The first issue concerns Boeing’s flagship commercial aviation business. CNBC is reporting today that the rising cost of plane tickets is depressing demand for air travel, and that flight bookings dropped 17% in April as a result. Further up the supply chain, decreased demand for air travel has the potential to depress demand for new airplanes, which would obviously affect Boeing’s sales.  

That being said, rising ticket prices are more likely tied to rising oil prices than to anything Boeing has control over — so this is not really a problem that the company can be blamed for, or that it can fix. In time, travelers will adjust to the new reality that prices are higher, and I’d expect prices, and demand, to stabilize.

Now what

Of greater interest is the negative press Boeing is catching this week over a Reuters report on its “clash” with space stock supreme Aerojet Rocketdyne (NYSE: AJRD), which manufactures the propulsion system for Boeing’s CST-100 Starliner space capsule.

Last year, stuck valves on the Starliner’s steering jets forced Boeing to scrub a planned launch that would be a key milestone toward getting Starliner certified to carry astronauts to orbit. Boeing blames Aerojet for the mishap, citing design flaws. Aerojet says Boeing got the valves stuck itself, by using the wrong kind of cleaning chemicals — and Aerojet is refusing to redesign the system unless Boeing antes up more money for the work.  

You might think this is just a run-of-the-mill contract dispute, and one that will eventually be resolved by Boeing paying Aerojet some money, or suing Aerojet to fix the problem for free — but the stakes here are actually much higher, and much more time sensitive.

Boeing, you see, has been trying to get its CST-100 certified for human spaceflight for more than two years now, and so far unsuccessfully. If a planned rerun of its test flight on May 19 is delayed again — or fails! — because of a sticky valve, this would be a real disaster for Boeing’s space business, potentially forcing it to admit only SpaceX has the ability to put Americans in space for years to come.

It’s not too much of an overstatement to say that the fate of Boeing’s space program now hinges upon a single sticky valve — and unless it gets this problem solved in the next seven days, its stock could have even further to fall.

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US & HK* Trades. Click Here!