Exit Boeing Co (BA) Stock Before It Stalls Out
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Some analysts are finally preparing for takeoff in Boeing Co (NYSE:BA). But with BA stock flying at record altitude and quickly hitting our price target, this strategist suggests cutting risk before more threatening conditions force investors toward the emergency exit. Let me explain.
Source: Wikimedia
Nearly a month ago, I wrote an article on BA stock that called for safely riding its staunch technical trend using the options market to guard against turbulence.
This strategy has worked incredibly well. The spread has gone on to return over 50% with a current profit capture of $1.25 compared to 5% for investors holding BA stock from $199 to $209 over the period.
And there’s huge room for profit improvement if BA stock simply continued to cruise at its current levels. But what’s remained an obviously friendly trend shouldn’t be taken for granted, despite what other passengers just climbing aboard are now saying.
Last time, I discussed the opportunity that Wall Street’s less-than-enthusiastic endorsement of BA stock could actually work to benefit Boeing investors. The idea was that analysts would need to play a game of catch-up, as the overall recommendations and consensus price target were out of touch with Boeing’s fundamentals.
Now it appears that Wall Street is waking up to Boeing’s healthy dividend, low payout ratio, double-digit growth, recent upwardly revised guidance, strong and improving cash flows, and a healthy backlog. This past Friday, JPMorgan upgraded BA stock to “overweight” from “neutral.”
To JPMorgan’s credit, a price target lift from $205 to $240 at least had the firm ahead of a queue of other flatfooted analysts. Yet, I can’t help but worry. While BA stock “only” has 15% upside to its December 2018 price target of $240, analysts consider the upgrade warranted “in a market where outsize upside is elusive.”
BA Stock Weekly Chart
Over the past few weeks, the BA stock chart has looked overall bullish. But the extra few percent of climbing, which optimistically looked possible before technical conditions would appear more troubling short term, has also worked its way into share prices.
With Boeing shares positioned outside the upper weekly Bollinger band, flirting with an overbought stochastics condition in the top spot in the Dow Industrials this year with a gain of around 34%, this analyst is keeping his price target of $210, but placing BA stock as a “reduce and hold” recommendation.