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Boeing shares grapple with more bad news

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The performance of Boeing shares have many institutional shareholders crying into their coffee this month. The crash of another 737 Max in Ethiopia last month is swiftly turning into the tip of the iceberg for Boeing.

Yesterday a Boeing shareholder filed a class action lawsuit against Boeing, claiming that the aircraft firm put profitability and growth ahead of airplane safety and honesty.

The suit is claiming that investors in Boeing shares suffered economic loss because of omissions made by Boeing and is also seeking damages for alleged securities fraud violations.

Boeing is also facing a claim for reparations from China Eastern Airlines Corp, a suit which also has major implications for the firm’s ability to sell its aircraft to China and elsewhere in East Asia. Boeing confirmed this week that orders for its planes fell in the first quarter to 95 from 180 a year earlier. There have been no further orders for the 737 Max following its worldwide grounding.

These numbers are not going to get any better for Boeing in Q2.

Despite a rally in late March, Boeing shares were trading at 364 this morning, down from 400 a month ago. However, all things considered, the Boeing share price has been remarkably resilient, possibly thanks to the support of US institutions and the passive investment community, which will hold Boeing stock regardless. Boeing shares were trading at 323.81 at the beginning of this year and have ridden the upwards wave in the US equities market.

Boeing shareholders who bought the stock at the start of the year could still take profit now ahead of Q2 numbers which are likely to be horrendous.

Boeing long term shareholders were braced for bad news ahead of the Ethiopia Airlines crash. According to Irithmics, which uses artificial intelligence to track investor behaviour and expectations around corporate news, Boeing investors were already expected bad news to hit the Boeing share price ahead of the crash.

“Shorter term tactical allocation began showing signs of instability from February 13,” says Grant Fuller, co-founder of Irithmics. “The news of the Ethiopian Airlines crash does appear to have expedited matters, especially as investors were becoming increasingly sensitive to negative data or news about Boeing.”

Coincidentally, Irithmics’ deep learning suggests Boeing’s vulnerability to systematic investment strategies, including shorting, has begun to rise since 4 March.

“It’s impossible for investors to have anticipated the tragic circumstances of Ethiopian Airlines, but it is clear the news came at an especially sensitive time for investors,” adds Fuller.

 

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This article does not constitute investment advice. Make sure you do your own research or consult a professional advisor.

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