Dow component Boeing Company (BA) rose more than 4% Thursday after RBC Capital initiated coverage of the Seattle-based aircraft maker with an “outperform” rating. The bank’s equity analyst Michael Eisen said that he sees the value of Boeing stock beyond the COVID-19 pandemic as a commercial flight rebounds relatively quickly.
“We see a favorable Risk/reward profile in the stock,” Eisen wrote in a research report cited by Barron s. The analyst expects a double-digit growth in air traffic between now and the end of 2024 to provide Boeing with the wind back over the next few years. In addition, it is estimated that Boeing is set to land 737 Max will fly again in the third quarter, helping to ramp up profits. The difficulty of the jet has weighed heavily on the stock after having been sidelined in March last year following two fatal accidents. Eisen set 12-month price target on Boeing shares to $165, which represents nearly 20% increase from Thursday’s, $138.80 close.
The stock broke out from a two-month declining wedge earlier this week, with its price closing above 50 day simple moving average (SMA) in the session yesterday. Swing traders might look to play a first move to the top of the wedge model at $186.50, followed by an eventual test of January’s swing low at $300.93. Manage the risk by placing a stop below the intermediate support at$125.
Other stocks in the aerospace sector as manufacturing and the provision of commercial aviation equipment recorded an increase after the RBC optimistic view on Boeing. Let’s take a closer look at two in particular.
Raytheon Technologies Corporation (RTX)
Raytheon Technologies Corporation (RTX) provides advanced systems and services for commercial, military, and government clients. The $91.06 billion of the company created by the merger of United Technologies, and Raytheon – reported first quarter adjusted earnings of $1.78 per share to provide a bottom-line surprise of 60.36%. A solid performance during the period of the aerospace giant’s aircraft engines and auxiliary power systems company, has led the better-than-expected result. Although Raytheon stock trades 35% below the year to date, it has gained 11.59% in the last week of 22 May 2020. Raytheon also publishes a 3.29% dividend yield.
Raytheon shares followed lower in a tight falling wedge, between mid-April and mid-May, before breaking above the model top trend on Monday. In addition, a bullish cross of the moving average convergence divergence (MACD) in histogram MACD line above its signal line confirms the breakout. Those who take a trade must place a stop under Monday’s low at $55.52 and set a profit target to close to key the horizontal line of resistance at $71.
TransDigm Group Incorporated (TDG)
With a market capitalization of us $20.25 billion, TransDigm Group Incorporated (TDG) provides components of the plane through three segments: Power and Control, Cell, and Non-aviation. The company, which generates about 70% of its sales from commercial aerospace customers, releases second quarter earnings per share (EPS) of $5.10, easily exceeding the estimates of Wall Street $3.83 per share. The figure has also increased by 22.6% compared to the previous year. Of 22 May 2020, TransDigm stock has dropped 33% year-on-year, but has rebounded by 22% in the past month.
Since dropping about $200 in March, the shares have been traded within a clearly defined symmetrical triangle, as investors remain undecided on the stock of post-pandemic. Prices have climbed a notch above the pattern in recent sessions, which could trigger a short-covering rally, given that approximately 7% of the air from the equipment manufacturer’s stock float is held short. Traders who enter at current levels should consider booking profits of around $475, where the stock may run into resistance from the bottom of the trend line of a previous trading range and the 200-day SMA. Guard against a failure of the escape by cutting losses if the price closes below the May 18 low at $344.64.