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Are Boeing Shares Set to Soar?

Tuesday, 30 Aug 2011 | 12:22 PM ET

A Nomura upgrade this morning is helping the aerospace giant lead the Dow, but it also has some market participants wondering if the stock is downright cheap.

Boeing is trading at 15-times earnings, but as Options Action contributor and Cantor Fitzgerald's Mike Khouw points out, that's a significant discount to its historical average. "Over the last 10-years, the earnings multiple for the company is around 20-times," said Khouw.

It should be pointed out that Boeing's seemingly low multiple comes amid low valuations for the overall market, but the stock's also looking attractive from a technical perspective. As Oppenheimer's Carter Worth notes, Boeing shares are trading 8% below its 150-day moving average, meaning the stock could easily rally of a couple points if it can just get back to its normal trading range.

And with the company announcing plans to redesign its workhorse 737, and the Dreamliner finally becoming a reality, some feel Boeing shares are poised to move one way or the other.

"They're in a period where they're either going to deliver or they're not," said Jefferies Howard Rubel (BUY). "I'm in the first camp."

Post Script.

In the file of "It's better to be lucky than good," last Friday, Khouw and Worth suggested a bullish options trade on Boeing, selling the Jan '12 57.5-strike put to finance the purchase of the Jan '12 62.5/72.5 call spread, a trade that offers a $10 return for no premium outlay.

Specific trade below

Mike's Boeing Options Trade

  • BUY JAN ‘12 62.50-STRIKE CALL FOR $5.40
  • SELL JAN ‘12 72.50-STRIKE CALL FOR $1.75
  • SELL JAN ‘12 57.50 STRIKE PUT FOR $3.80

How Mike's Trade Makes Money

  • PROFITS CAPPED at $72.50
  • PROFITS ABOVE $62.50
  • GET LONG AT $57.50
  • LOSSES BELOW $57.50

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