As far as large-cap stocks are concerned, there are only some stocks that can match up to Boeing Co (NYSE:BA). Over the years, it has been one of the safest investments in the market, but the coronavirus pandemic has hit the company quite hard. The stock has declined by as much as 60% in 2020 so far.
The coronavirus crisis has smashed aircraft stocks in light of negligible air travel, and that in turn has resulted in minimal demand for Boeing’s planes. In this sort of situation, many investors might be thinking about backing this blue-chip stock, and hence, it might be necessary to take a closer look.
The crisis has forced Boeing to cut costs substantially, and on top of that, it raised $25 billion through an oversubscribed bond sale. The bond sale proves that there are market participants who are bullish about Boeing’s long term future. In the first quarter, the company had burned as much as $4.7 billion, and it seemed that it would have to opt for a government bailout in light of the crisis.
However, the bond sale has changed the situation somewhat. It would not have $40 billion in cash and $10 billion more in the form of credit lines. It has $10 billion worth of debt maturities for the rest of 2020, and a $13 billion term loan matures in 2022.
If the company can refinance the loans, then it would have $10 billion in cash on its books for the next three years, even if there are more troubles related to Max. That being said, the current situation is not expected to improve quickly. Travel is going to come back to normal over a long period of time, and the demand for new planes is going to be low.
That would have a significant effect on Boeing’s performance going forward. The ongoing issue with its 737 Max is another major headache for the company as well. While it is true that the company has taken steps to improve the situation, and the stock will possibly recover eventually. However, Boeing might not be an investment worth making at this point.