PreMarket Prep Stock Of The Day: Boeing

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Two Goldman Sachs analysts made conflicting predictions over the last 24 hours. One of those was based on the overall direction of the market — negative — and one the other was an upgrade to Boeing Co BA. Unless you can have your cake and it eat it too, then both of these calls are unlikely to occur. 

A Bearish Call On S&P 500 And Slashed 2020 Earnings Estimates 

On Sunday evening, it emerged that Goldman Sachs believes the S&P 500 could fall to 2,000 as U.S. GDP shrinks and corporate earnings follow suit. The bank said the country is going into a prolonged recession led by a steep decline in EPS.

"We now forecast S&P 500 EPS of $110 in 2020, a decline of 33% from 2019," Goldman Sachs equity strategist David Kostin said in a Friday note. 

Based on that information, it would difficult for investors to be bullish on any issue, especially one that has been the poster child for the decline: Boeing. 

Boeing Upgraded To Buy

Before the open Monday, Goldman Sachs upgraded Boeing Airlines to from Neutral to Buy and lowered the price target from $256 to $173. It's an interesting call for a few reasons.

First of all, the company had major problems way before the broad market went into a freefall.

The grounding of its 737 MAX for safety reasons crippled its production forecasts and created the possibility of major lawsuits from the families of the 346 victims who perished in downed planes. 

Also, with all of the major airlines on the brink of the bankruptcy, massive consolidation in the industry is likely, resulting in a surplus of planes instead of the need for new ones.

Finally, the company is smothered in debt that may only be mitigated when and if it taken over by U.S. government, which would result in a huge dilution of its share price.

Long-Term Boeing Price Action

On March 1, 2019, Boeing peaked at $446.01; it ended the month at $381.42.

For several months, it consolidated between $320 and $380 until the the bottom in late February 2020 and a continued downward trajectory in March. 

Short-Term Boeing Price Action

So far, the low for the move was made on March 18 at $89. It rebounded back $107.85 Wednesday, but ended the week at $97.71.

After a higher open in Monday's session, the issue continued higher before peaking at $101.20 and reversed course before rebounding to a high of $111.93. The stock was up 9.46% at $104 at the time of publication.

Boeing Moving Forward

Keep in mind, the two calls were made by different analysts at Goldman Sachs, and the Boeing "Buy" recommendation was independent of the macro call made by Kostin.

However, analysts call are meaningless in this market environment. Until there is at least a slowdown in the rate of increases of coronavirus cases or a vaccine is found, it may be best to limit exposure to individual equites, especially one in Boeing's predicament. 

Photo by SounderBruce via Wikimedia.