(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)
Boeing Co. (BA) stock is flying high in 2018, with shares rising by almost 25%. But technical analysis suggests the shares will pull back by as much as 10% in the coming weeks. The bearish view reflects analysts' falling estimates for the third quarter.
The negative sentiment comes in stark contrast to many analysts' bullish outlook on the stock, which has been stuck in a trading range since April after rising sharply earlier in the year. The key worry has been trade tensions between the U.S. and China. (See also: Boeing Shares Are Alerting Bullish Trading Activity.)
Yesterday, shares of the aerospace company hit technical resistance at approximately $373. That is now the third time the stock has failed to break out, a bearish sign. Should the stock drop, it is likely to fall back to the lower end of its 3-month trading range of around a price of $332. (See also: Boeing's Stock May Soar By 16% on Faster Growth.)
One reason why investors may be hesitant to bid up the price of the stock is the falling estimates. Over the past month, analysts have reduced their third-quarter sales and earnings forecasts. Analysts now estimate earnings of $3.48 per share, a decline of almost 6%. Meanwhile, revenue estimates dropped 3% to $24.2 billion. Analysts forecast the company will grow its earnings by 28% versus last year on very weak revenue, a decline of 1%.
Analysts still see earnings growing by 42% in 2018. But again, revenue is expected to grow much more slowly, by only 6%.
Analysts still remain optimistic about the stock longterm and see shares rising to an average price target of $410, 11% higher than today. But analysts' target - and forecast for stock growth - may come down if estimates continue to drop.
Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdings. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.