Of all the industries that took it on the chin during the 2020 lockdowns, airlines had the most ground to make up; investors expected a huge comeback this year.
And they got it – kind of. The spring offered some nice profits for investors who bought in at the 2020 lows, but most of the major airline stocks have been unable to maintain that momentum into a summer thwarted by the delta variant.
The U.S. Global Jets ETF (NYSEArca: JETS) – which tracks the biggest airline companies in the world – gained more than 33% between Feb. 1 and March 15, 2021. But that rise has been followed by as much as 24.8% decline since then.
The ongoing surge in delta-variant COVID-19 cases around the world has thrown some cold water on air travel demand; many airlines are reporting weaker booking numbers, though nowhere near as weak as 2020.
But there is a big, bright spot out there in a beaten-down, old-school aerospace play investors fled in droves back in 2020.
Starting Tuesday, at market open, take advantage of a perfect entry point for a stock that’s offering at least 50% upside…
This Classic Stock Is Looking Great Again
With all the SPACs, crypto, SaaS, digital streaming, cannabis, and other flashy investments that have exploded over the past 18 months or so, you could probably be forgiven for overlooking the steady, impressive comeback the Boeing Co. (NYSE: BA) has mounted lately.
It seems like a million years ago, but in 2018 and 2019, two tragic high-profile crashes that killed nearly 350 people forced Boeing to pay a $2.5 billion settlement – and led to the grounding of its fourth-generation 737 MAX jetliners.
And when air travel demand cratered during the pandemic, well, you can see why BA fell as much as 68% between February 2019 and March 2020.
Even as the 2018 and 2019 crash investigations were ongoing, Boeing was working hard to resolve the allegedly deadly issues in its 737 MAX jets, making them safe to fly and convincing regulators all over the world that the plane is airworthy again.
In fact, the U.S. Federal Aviation Administration (FAA) granted approval back in December 2020.
But Boeing is, of course, taking its case on the road, talking with regulators all over the world. And those regulators are liking what they’re seeing; regulators in 175 of 195 countries have recertified the 737 MAX, giving it the green light to resume flights.
Those global regulatory efforts paid off big-time recently, when India’s Directorate General of Civil Aviation approved Boeing’s bid to allow the 737 MAX to fly into and operate in the country. India is currently the third largest civil aviation market.
The Future Looks as Great as the Past
India’s $7 billion flag carrier, Air India, serves 60 destinations on four continents. Like most airlines, it operates a mix of aircraft; it flies Boeing’s planes, but it also operates planes from Boeing’s arch-rival, Airbus SE (OTC: EADSY).
Currently, Air India operates more Airbus aircraft, but its long-haul, intercontinental routes use Boeings almost exclusively. With India’s strategic pivot away from its historic ally Russia toward the United States, Boeing has a golden opportunity to make even deeper inroads into one of the world’s most important aviation markets. The Boeing 737 MAX aircraft might soon fill up more and more Indian domestic routes.
Despite what’s clearly fantastic news for Boeing, the shares are down nearly 1% over the past five sessions. That’s likely due to the overall negative investor sentiment right now in anything air travel-related while the surge in the pandemic worsens.
The way I see it, this is a chance to own one of America’s best companies at an unusual discount; BA is still trading almost 50% below its pre-pandemic highs.
The next big hurdle for the 737 MAX – and Boeing – is China, where regulators have been testing the aircraft recently, but have not yet set a timeline for approval. Assuming Boeing can regain permission to fly in China, it would open up another massive new space in which to sell its aircraft.
This is shaping up to be the overlooked comeback play of 2021 – and 2022, I’d bet – so buy in the minute the market opens after the Labor Day holiday.
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Source: Money Morning