What happened
Shares of Boeing (BA 2.34%) climbed as much as 7% on Monday after the company received a new order for its troubled 737 MAX and got a price-target boost on Wall Street. Boeing is still in recovery mode following the issues with the MAX and the pandemic, but the company appears to be headed in the right direction.
So what
It's been a rough year for Boeing shareholders, with the stock down 18% over the past year as the company deals with a pair of deadly 737 MAX accidents and then lower demand for new airplanes because of the pandemic. But things are improving: The stock was down nearly 75% last spring at the height of the pandemic scare.
A 747 MAX in the United fleet. Image source: Boeing.
Boeing is slowly making a comeback. The 737 MAX was cleared to fly again late last year after 20 months on the ground, and on Monday the company got word that United Airlines Holdings (UAL 5.13%) was adding 25 of the 737 MAX jets to its order. United is also accelerating deliveries on 45 of the aircraft to 2022 and 2023. In total, United has 188 of the 737 MAX on order.
The accelerated deliveries might be the best news of all for Boeing. The company manufactured more than 400 planes during the 737 MAX grounding that it now needs to find homes for, at a time when most airlines are not expanding their fleets.
Boeing also got a boost from Wall Street, with Morgan Stanley analyst Kristine Liwag raising her price target on the stock to $250 from $230.
Now what
Given Boeing's need to move inventory, United likely got a good deal on the new orders. Still, the news is good for Boeing shareholders.
The company bled through $19.7 billion in 2020, and desperately needs deliveries to get cash coming in. Even if the new orders are well below sticker price, rebuilding a 737 MAX program that was once expected to be among the most successful of all time is the bigger priority.
Still, investors should note that this news is one small step in a long recovery for Boeing. Until the pandemic is behind us and airlines are able to rebuild their balance sheets, we are unlikely to see the sort of upcycle in new plane orders that Boeing was enjoying before.
