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  • AvatarDan Quinones
    Participant
    Post count: 5

    How do you feel about airline stocks (i.e. American, Delta, United) and related stocks such as Boeing. They have taken a massive hit during the pandemic and I would believe they are bound to bounce back.

    Sean HymanSean Hyman
    Keymaster
    Post count: 3832

    They’re fundamentally beaten up, and they’ve lost most of their business and there’s no certainty when that will continue. Keep in mind, Warren Buffett dumped ALL of his airline stocks too.

    Boeing is still to expensive relative to its earnings and it doesn’t have great guidance yet either. And if their customers aren’t flying people…they won’t be buying planes. So I’m not a fan of it either right now. Also, there are too many novice Robinhood traders chasing after these and getting beaten up by it.

    So when the dumb money is chasing it, it’s even more reason to stay away.

    Steve KenagySteve Kenagy
    Participant
    Post count: 21

    Airlines have never really generated consistent profits and they have really high fixed costs, subject to union compensation issues and high energy costs.

    Leslie HarvathLeslie Harvath
    Participant
    Post count: 280

    Dan, two more markers to look @ (see Yahoo’s finance page of statistics on each (AAL, DAL, UAL, etc.)): their debt to market cap ratios are off the charts and raw earnings (EBITDA) are either negative or extremely low. Pop the word ‘airline’ in the Forum search to see more, too. ūüôā

    Sean HymanSean Hyman
    Keymaster
    Post count: 3832

    Yes, in general, they’re a horrible sector. Steve is right.

    People see a falling stock price and think its a bargain. But sometimes it’s just a reflection of the business/sector. For instance, LUV still has a forward P/E of 47 and DAL of 21. Is that a bargain? Not relative to their earnings (which is more important than simply a fall “per share”).

    So a stock can fall a ton per-share and still be expensive. Or it can fall a ton per-share and be cheap. The stock price, per share doesn’t matter nearly as much as the price relative to its earnings.

    Great thoughts from Leslie too.

    Christiaan VlasblomChristiaan Vlasblom
    Participant
    Post count: 222

    I see all issues with airliners short-term. Would not invest in them either.

    Concerning Boeing I am a bit more positive long-term. If Boeing is able to fix the 737 Max issues with FAA the stock could jump out of the current depths. Test flights with FAA people on board have been restarted yesterday.

    In addition Trump will not allow Boeing to go bankrupt the coming 4 years. The new ordered Airforce 1 will not become an Airbus 1…

    The world also needs two capable aircraft manufacturers for other reasons: dual sourcing, healthy competition, risk reduction so that one design flaw does not stop the world from flying.

    Sean HymanSean Hyman
    Keymaster
    Post count: 3832

    My problem with BA is the high forward P/E and the high debt. https://finance.yahoo.com/quote/BA/key-statistics?p=BA

    Plus, their dividend had to be completely eliminated.

    So, I don’t think they’re going under. But that doesn’t make them presently investment-worthy either, in my opinion.

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