A Boeing call shows why travel won't be a total wash despite Omicron

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Wednesday, December 22, 2021

People still want to roam, and Big Pharma can help

The Omicron variant of COVID-19 is swamping the U.S. and creating lots of market volatility in its wake. Meanwhile, the efficacy of vaccines is being called into question, and 2022 already appears to be starting on a bad note — even though it’s still more than a week away.

Yet, there’s still hope emanating from an unlikely place: travel, the sector most vulnerable to the vagaries of the pandemic, but one that’s held up surprisingly well under the current waves of infections.

And one fairly bullish call on Boeing (BA) crystallizes a few key reasons why grim headlines about COVID-19, big airlines cutting routes — and very unruly passengers that have stressed out pilots and crew members — should be put into necessary context.

Citing a Bank of America analysis, Yahoo Finance’s Thomas Hum wrote on Tuesday that while international travel is still weak, there’s “not much [of an] Omicron effect” on domestic travel. The latest COVID variant is rattling the public, yet Transportation Security Administration data shows that holiday travel is flirting with pre-pandemic highs.

As of Monday, TSA checkpoints are processing more than twice as many travelers as the comparable period in 2020, and closing in on 2019’s numbers.

Digging into the numbers, Hum reported that carriers including Delta (DAL), American (AAL), United (UAL) “all saw sizable increases in website visits — U.S. airlines’ trailing seven-day site visits grew 15% for the week ending Dec. 14 compared to 7% last week.”

All of that speaks to the “living with the virus ethos” ameliorating the worst ravages of the pandemic, and why most states and localities are (at least for the moment) erring on the side of allowing citizens to move freely around the country.

Not to be outdone, CFRA Research on Tuesday reiterated a “Strong Buy” on Boeing. To recap, the beleaguered aerospace giant spent most of 2019 containing the fallout from its grounded 737 Max flagship plane, then struggled to stay afloat last year as the pandemic and 737 Max crisis hammered its bottom line. Meanwhile, technical issues associated with its 787 have hampered deliveries.

Colin Scarola, CFRA’s senior equity analyst, thinks the company still has some challenges ahead. However, “things should be drastically better for Boeing in one year, just as they are so much better now versus one year ago.There will likely be plenty of good news by the end of 2022, leaving the company in a much better place by next year's end.”

The next part is where Big Pharma comes in. Pfizer (PFE) is likely to receive regulatory approval for a new at-home COVID drug that, in combination with vaccines, will help reduce fatalities and hospitalizations. That will bring “COVID-19 deaths in line with a typical flu, allowing offices to reopen and international travel restrictions to drop.”

Connecting the dots, rebounding air traffic will boost demand for Boeing’s planes, and see passenger levels return to or even exceed pre-pandemic water mark.

A win for modern science, free markets, and freedom of movement — all in one aggressive stock call.

By Javier E. David, editor at Yahoo Finance. Follow him at @Teflongeek

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