Upon hearing the news of the 737 Max's grounding, investors might have expected Boeing shares to fall sharply. Boeing's stock is still up 16% this year, after all. But there are a few reasons why the stock held up.
First, Boeing had a very strong start to the year. The company previously reported strong fundamentals in its fourth quarter earnings, driving its stock up 38% to its 2019 peak.
Also notable, analysts have been saying that any grounding of the aircraft would likely have a limited impact on Boeing's long-term business.
In a note published Wednesday morning, Morgan Stanley analyst Rajeev Lalwani said he expected any grounding of the planes to be temporary, and that the stock-price volatility surrounding the crashes represented a buying opportunity.
Airline orders are long-cycle and are subject to contract, making it somewhat difficult to switch manufacturers. For these reasons, Morgan Stanley said the worst-case scenario was a need for corrective action rather than wholesale cancellations of the order book.
"Ultimately, we are of the view that implications are likely to be short-lived, covering weeks and months as opposed to quarters and years, pending further clarity on safety and any necessary fixes," he wrote.
Lalwani maintained his "overweight" rating and $500 price target 32% above where shares were trading Wednesday.
