NEW YORK (TheStreet) -- Trifecta Stocks holding Boeing (BA - Get Report) is a big company, a big employer, and a big part of the Dow Industrials. The closely followed Dow Jones Industrial Average (DJIA) is a price-weighted index, meaning that high-priced stocks like Boeing and Goldman Sachs (GS), for example, carry a bigger influence than Verizon (VZ).
BA peaked early in 2015, well ahead of the general market, see chart above. Prices had already eroded before the August nosedive. Prices rebounded to the bottom of the $140-$150 resistance zone. This first chart above also shows a broad consolidation last year between $120 and $135. Remember that $15 range for a minute while we look at this next chart, below.
This chart above shows the movement of the 40-week (a.k.a. 200-day) moving average. BA broke sharply below the 40-week average and a rebound rally stopped well short of the underside of the average -- a sign of weakness in my book.
With BA trading in the $127-$128 area, it has traded halfway into that $135-$120 support area mentioned above. A seasoned trader by the name of Amos Hostetter had a rule of thumb that if a stock went more than halfway through a support (or resistance) area it was likely to go all the way through. With BA right at that 50% point with a weak tape, we would worry that BA could sink further.
This point and figure chart of BA above shows that key support area and how deep the selloffs have gone. Below $120, the next visible support area on the chart comes in around $100.
We hope there is some "service" with this flight.
Separately, TheStreet Ratings team rates BOEING CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate BOEING CO (BA) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and solid stock price performance. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- BA's revenue growth has slightly outpaced the industry average of 5.0%. Since the same quarter one year prior, revenues rose by 11.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Aerospace & Defense industry and the overall market, BOEING CO's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has significantly increased by 82.25% to $3,297.00 million when compared to the same quarter last year. In addition, BOEING CO has also vastly surpassed the industry average cash flow growth rate of 26.80%.
- BOEING CO's earnings per share declined by 29.0% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, BOEING CO increased its bottom line by earning $7.40 versus $5.97 in the prior year. This year, the market expects an improvement in earnings ($8.05 versus $7.40).
- Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period, despite the company's weak earnings results. The stock's price rise over the last year has driven it to a level which is somewhat expensive compared to the rest of its industry. We feel, however, that other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: BA