Guest Schwab711 Posted January 22, 2020 Share Posted January 22, 2020 The market is up 40% from the Dec 2018 low, BA is roughly flat. That's a pretty big move. Airbus trades at 16x EBITDA or 30x earnings. Assuming 737 MAX issues are fixed, BA trades at 10+ normalized EBITDA and 15x normalized earnings (which may be several years to a decade away). That's potentially a big discount rate on near-term uncertainty though. Maybe it's not attractive to you and that might be a reasonable take, but it's not exactly grossly overvalued on a relative basis. Fittingly, BA seems to be putting a proportional amount of resources into resolving the 737 MAX issue. Of course we are 6+ months away from approval. BA just said as much. I'm not sure how you have insight in to longer. I guess that is another example of what I mean. Maybe you have greater insight into the aerospace field than I realize. It seems like you are using a lot of hyperbole though. There are no prior examples to gauge timing of re-approval. All we have is what BA has communicated. Link to comment Share on other sites More sharing options...
InelegantInvestor Posted January 22, 2020 Share Posted January 22, 2020 Hyperbolic pessimism keeps me from assuming the best case. Boeing has consistently underestimated the depth of this problem and the time to fix it. They refused to address it after the first crash. There is nothing to indicate the culture has changed or that their new projections are any more reasonable than their old. If they are right about what they are saying, then maybe it's worth what it's trading for now. But if they aren't, it's worth substantially less. So when I look at this, I see too much uncertainty, likely risk to downside, too hard for me to be confident that I can believe them, and, even if I do, limited upside, certainly in short term. I'd rather buy this derisked 10% higher with a clearer picture than where we are now. The market is up 40% from the Dec 2018 low, BA is roughly flat. That's a pretty big move. Airbus trades at 16x EBITDA or 30x earnings. Assuming 737 MAX issues are fixed, BA trades at 10+ normalized EBITDA and 15x normalized earnings (which may be several years to a decade away). That's potentially a big discount rate on near-term uncertainty though. Maybe it's not attractive to you and that might be a reasonable take, but it's not exactly grossly overvalued on a relative basis. Fittingly, BA seems to be putting a proportional amount of resources into resolving the 737 MAX issue. Of course we are 6+ months away from approval. BA just said as much. I'm not sure how you have insight in to longer. I guess that is another example of what I mean. Maybe you have greater insight into the aerospace field than I realize. It seems like you are using a lot of hyperbole though. There are no prior examples to gauge timing of re-approval. All we have is what BA has communicated. Link to comment Share on other sites More sharing options...
Spekulatius Posted January 23, 2020 Share Posted January 23, 2020 10x normalized EBITDA isn’t exactly cheap in my for a company with that big of an existential issue. The fact that Airbus stock is also very expensive isn’t really helping all that much. Perhaps and investinöd thesis is w might benefit from Boeing’s problems - perhaps defense peers who might benefit from a sale of some of Boeing’s defensive business? my former holding BAESY benefited from some crumbs from the UTX merger where they acquired some business, even though the sales prices wasn’t exactly a bargain (12x EBITDA) LMT could never buy Boeing’s defensive business (at least not aerospace) unless thenUS government accepts that they have a monopoly on Advanced fighter Aircraft and many other things going forward. I can’t see that happening. Perhaps GD or UTX/ Raytheon... Link to comment Share on other sites More sharing options...
griezeman23 Posted January 23, 2020 Share Posted January 23, 2020 Kind of reminds me of the WFC situation... Constantly underestimating the main issue while also having a bad culture. Then you promote your new CEO from within the ranks. Mind you, there are key differences: BA is a USA darling (no other large competitors in the US), but WFC did not kill anyone. I think the 737 MAX issue and culture issue has a lot longer to play out than just thru the summer. Would not be surprised to see BA hire an outsider in late 2020 to clean this mess-up. My very, very high level analysis make me think that they do not have have any real liquidity issues given the defense segments. Even down at $300, I think the stock trades pretty full on 2021 estimates, which gives me pause, b/c there are still so many risks here! Link to comment Share on other sites More sharing options...
InelegantInvestor Posted January 23, 2020 Share Posted January 23, 2020 Kind of reminds me of the WFC situation... Constantly underestimating the main issue while also having a bad culture. Then you promote your new CEO from within the ranks. Mind you, there are key differences: BA is a USA darling (no other large competitors in the US), but WFC did not kill anyone. I think the 737 MAX issue and culture issue has a lot longer to play out than just thru the summer. Would not be surprised to see BA hire an outsider in late 2020 to clean this mess-up. My very, very high level analysis make me think that they do not have have any real liquidity issues given the defense segments. Even down at $300, I think the stock trades pretty full on 2021 estimates, which gives me pause, b/c there are still so many risks here! Calhoun is the worst of both worlds, long term board member and also, a Jack Welch-GE guy. The articles around his promotion actually quote Immelt praising him. They need a CEO who gets engineering, not financial engineering. Link to comment Share on other sites More sharing options...
plato1976 Posted March 11, 2020 Share Posted March 11, 2020 curious why it's so quiet here isn't it exactly the time this topic should be hotter ? Link to comment Share on other sites More sharing options...
rb Posted March 11, 2020 Share Posted March 11, 2020 Cause they were way overvalued to start. Then they screwed the pooch, which destroyed value. Making them even more overvalued. I'm looking at it because I like the space, but honestly they have to come down some more for me to get exited. Link to comment Share on other sites More sharing options...
thepupil Posted March 11, 2020 Share Posted March 11, 2020 My parents had a long held 1% position I never paid any attention to. I sold today because I don’t own any other companies maxing out their credit line; just not going to be my chosen vehicle to ride through a downturn/take advantage of a recovery. In the past i didn’t want to sell for tax purposes but the correction means they’ll have some lots at losses to be sold. I say this as an anecdote that any casual shareholder with little conviction or analysis (which exist) probably punched out today. Maybe that’s a good sign for potential longs Link to comment Share on other sites More sharing options...
bergman104 Posted March 15, 2020 Share Posted March 15, 2020 I can't be the only one look at BA right now. Anyone have a good place or write-up for background info? Link to comment Share on other sites More sharing options...
plato1976 Posted March 16, 2020 Share Posted March 16, 2020 BA, DIS, WFC, BP are the 4 I am looking hard into... appreciate background info as well I can't be the only one look at BA right now. Anyone have a good place or write-up for background info? Link to comment Share on other sites More sharing options...
Broeb22 Posted March 16, 2020 Share Posted March 16, 2020 BA, DIS, WFC, BP are the 4 I am looking hard into... appreciate background info as well I can't be the only one look at BA right now. Anyone have a good place or write-up for background info? When does Buffett bail these guys out or buys them in their entirety is a better question. Should know a lot about them given Precision Castparts ownership. Link to comment Share on other sites More sharing options...
Spekulatius Posted March 16, 2020 Share Posted March 16, 2020 BA, DIS, WFC, BP are the 4 I am looking hard into... appreciate background info as well I can't be the only one look at BA right now. Anyone have a good place or write-up for background info? When does Buffett bail these guys out or buys them in their entirety is a better question. Should know a lot about them given Precision Castparts ownership. Airbus is also available for 1/2 off and in a better shape. I think they might be a better deal. I can see BA restructuring. I don’t think that’s a risk with Airbus. Link to comment Share on other sites More sharing options...
Gamecock-YT Posted March 17, 2020 Share Posted March 17, 2020 Good thing they bought back all those shares they can now sell back in the market. Link to comment Share on other sites More sharing options...
Xerxes Posted March 17, 2020 Share Posted March 17, 2020 I can't be the only one look at BA right now. Anyone have a good place or write-up for background info? A better play is NOT to buy Boeing .. but to buy Airbus. Airbus's line-up in the narrow body is far better well placed than those of MAX. And now with Airbus in control of C-Series, it can expand that category at the bottom end of its narrow body line while focusing the centre of gravity of its its own future development on the NEO line-up toward the upper end: A.321 XLR. Boeing's issues are not just financials; its cultural. The Ex-GE Jack Welshian culture needs to go. Boeing was able to survive with the by the number culture for that long because the seeds of its current product portfolio were planted long ago before Stonecipher and McNerney took over. vis a vis BRK, my view was that eventually BRK will give them some convertible for a piece of the action. Even at its current reduced size, Boeing is too huge to be swallowed by BRK. Link to comment Share on other sites More sharing options...
Spekulatius Posted March 17, 2020 Share Posted March 17, 2020 BA will get a bailout from the government before the week is over. It might cost them though. A better play is NOT to buy Boeing .. but to buy Airbus. I agree with Airbus being the best play. The 737 max issue with Boeing has pushed the door wide open to become the leading commercial plane manufacturer. Link to comment Share on other sites More sharing options...
beerbaron Posted March 17, 2020 Share Posted March 17, 2020 BA will get a bailout from the government before the week is over. It might cost them though. A better play is NOT to buy Boeing .. but to buy Airbus. I agree with Airbus being the best play. The 737 max issue with Boeing has pushed the door wide open to become the leading commercial plane manufacturer. Is there some debt available? Maybe the debt is a better play? BeerBaron Link to comment Share on other sites More sharing options...
Jurgis Posted March 17, 2020 Share Posted March 17, 2020 Is there some debt available? Maybe the debt is a better play? BeerBaron Highest YTM is 20 year 5%+. Not that attractive IMO, BWDIK. Link to comment Share on other sites More sharing options...
Spekulatius Posted March 18, 2020 Share Posted March 18, 2020 BA, DIS, WFC, BP are the 4 I am looking hard into... appreciate background info as well I can't be the only one look at BA right now. Anyone have a good place or write-up for background info? When does Buffett bail these guys out or buys them in their entirety is a better question. Should know a lot about them given Precision Castparts ownership. Airbus is also available for 1/2 off and in a better shape. I think they might be a better deal. I can see BA restructuring. I don’t think that’s a risk with Airbus. https://finance.yahoo.com/video/boeing-talks-trump-administration-possible-215932595.html This didn’t take long. I agree the US should bail it out, call the stock a zero and rename it US Aerospace. Link to comment Share on other sites More sharing options...
5xEBITDA Posted March 18, 2020 Share Posted March 18, 2020 Is there some debt available? Maybe the debt is a better play? BeerBaron Highest YTM is 20 year 5%+. Not that attractive IMO, BWDIK. Convexity! This bond is trading at 80 cents and was 105 just a few days ago. Magically resolving all issues and getting the bond back where it was is a ~35% total return opportunity. Link to comment Share on other sites More sharing options...
Jurgis Posted March 18, 2020 Share Posted March 18, 2020 Is there some debt available? Maybe the debt is a better play? BeerBaron Highest YTM is 20 year 5%+. Not that attractive IMO, BWDIK. Convexity! This bond is trading at 80 cents and was 105 just a few days ago. Magically resolving all issues and getting the bond back where it was is a ~35% total return opportunity. Magically resolving all issues will probably produce way higher return on common. Link to comment Share on other sites More sharing options...
wabuffo Posted March 18, 2020 Share Posted March 18, 2020 Boeing will be the AIG of this crisis. wabuffo Link to comment Share on other sites More sharing options...
5xEBITDA Posted March 18, 2020 Share Posted March 18, 2020 Is there some debt available? Maybe the debt is a better play? BeerBaron Highest YTM is 20 year 5%+. Not that attractive IMO, BWDIK. Convexity! This bond is trading at 80 cents and was 105 just a few days ago. Magically resolving all issues and getting the bond back where it was is a ~35% total return opportunity. Magically resolving all issues will probably produce way higher return on common. True, but equity has a lower risk adjusted return. Link to comment Share on other sites More sharing options...
Spekulatius Posted March 18, 2020 Share Posted March 18, 2020 Which bonds are you guys looking at. I checke some on IB, like a 2.2% one maturing in May 2022, it it seems to trade in the mid nineties with a enormous bid/ask spread. I really like bonds that trade at less than 70cents on the $ and we are not even close. Anyways, I think BA is too big to fail and will get bailed out.Bonds should be fine, but hopefully equity gets zero’d. last time I checked they were running the company with -$8B in equity due to buyback bonanza. They use their suppliers as working capital donors so a BA default would lead to a chain reaction and I don’t think that’s going to happen. Link to comment Share on other sites More sharing options...
Jurgis Posted March 18, 2020 Share Posted March 18, 2020 Which bonds are you guys looking at. I checke some on IB, like a 2.2% one maturing in May 2022, it it seems to trade in the mid nineties with a enormous bid/ask spread. Highest YTM are 2039/2042 ones. Or at least they were at Fido yesterday. Link to comment Share on other sites More sharing options...
BG2008 Posted March 18, 2020 Share Posted March 18, 2020 wow, I actually thought of buying some Boeing puts, I forgot why I didn't Link to comment Share on other sites More sharing options...
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