Prospects for Boeing shares after the planes crash

After the Boeing 737 MAX 8 planes fell in Indonesia, and in Ethiopia too, they started talking about a technical fault of the Boeing 737 MAX 8 model. In turn, this caused a wave of rejection of using these planes. First, by major carriers and countries, and then by virtually all, which forced all countries to stop using a certain model of Boeing aircraft.

At the time of writing this article, investigations into the tragedies in Indonesia and Ethiopia continues. But even on the early stages, there are already coincidences on key factors indicating the similarity of the malfunctions of this aircraft model.

According to rough estimates this failure is in the software. As a result, the MCAS system (maneuvering characteristics augmentation system) could display incorrect sensor readings, which made pilots mistaken. In consequence, it could serve as a reason for the tragedy.

While the investigation into the two crashes of Boeing 737 MAX 8 aircraft is underway. Boeing Co shares fell by more than 17%, actually dropping to January highs before the quarterly report was published.

The main factor in reducing the shares of the company Boeing Co is undermining its credibility as the world’s largest manufacturer of aircraft and the failure to use the flagship model of the Boeing 737 MAX 8.

Production of the Boeing 737 MAX 8 is underway, but sales are still suspended. This is despite the fact that the approximate number of orders is about 5,000 units. At the time of the disaster in Ethiopia, 370 aircraft had already been exploited.

The further dynamics of the Boeing Co action will largely depend on the official results of the investigation and compensation. But more important is the preservation of contracts for the supply of aircraft, which previously caused a significant jump in the value of the company’s shares.

Technically, the shares of Boeing Co remain near significant support of 369.00-360.00, from which theoretically one can expect a rebound and correction. But it is worth noting the significant fundamental factors around the crashes of Boeing 737 MAX 8 aircraft, or rather, Boeing’s involvement in the certification of these aircraft. And if Boeing’s intervention is confirmed, this company’s shares can accelerate the decline.

It will be possible to wait for the correction after clarification in the investigation and publication of preliminary results on the announcement of compensation. It may trigger a new wave of sales. The correction should be considered when fixing above the resistance of 387.00-390.00.

But it is worth noting the consequences of the 737 MAX 8 crash for Boeing, which can reduce orders for this model significantly and undermine the authority of this company, prompting the need to update the model range. As a result, Boeing Co will incur new development costs, which will significantly increase the company’s costs.

There are no official results of 737 MAX 8 aircraft crashes yet. If the experts converge on a software failure, the shares of Boeing Co will proceed to the correction. More significant constructive errors on the contrary will continue to put pressure on shares. The investigation may be delayed, which will force the market to monitor the situation with Boeing aircraft.

Anton Hanzenko