Those cheap stocks you’re buying are not as cheap as you think! Shares of market crash stocks like Boeing, Carnival and United Airlines may not produce the returns you’re expecting…and I’ve got proof.
Want to see how to find stocks that are really cheap? Watch this video for three ways to find cheap stocks now! https://youtu.be/dRi8cIdxYOI
Investors need a reality check. The 2020 stock market surge has blinded investors with triple-digit returns and they want more. With most of the market trading close to its 2020 high, investors are now looking at those hardest-hit industries; shares of Boeing, Carnival Cruise and airlines like United to make them rich.
I’ve got a harsh wake-up for you though because these value stocks don’t have nearly as much value in them as you think. In this video, I’ll explain why these cheap stocks aren’t cheap. I’ll forecast earnings for Carnival, Boeing and United and give you a near-term stock price estimate for each.
When you see those estimates, I have a feeling you might be reconsidering all the money you have invested in these three stocks and others like them.
The problem is three-fold; debt, new shares and capacity. I’ll use all three of these to build out an earnings estimate for the stocks and then use historical PE ratios for a realistic target price.
All three of these companies; BA, CCL and UAL are issuing billions in debt on top of what was already weak balance sheets. One company will see the interest owed on debt surge to over billion a year, an expense that will make it very difficult to produce positive earnings. Not only will interest weigh on the companies’ earnings for years to come but they’ll have trouble competing in any kind of an industry rebound.
Capacity is another big issue for these cheap stocks. Even with a vaccine, as little as 25% of the population could be protected from the virus. In that scenario, do you really want to be taking a Carnival cruise or stuck on a United Airlines flight? Profitability margins were razor thin for these companies, now with limited capacity for what could be years…they will continue to struggle.
Carnival stock is down 70% since February and investors are salivating over the potential return if it gets back to that peak. The company is the largest cruise operator in the world but is issuing billion in debt that will destroy its flexibility and earnings. Besides that, Carnival is issuing billion in new shares which means lower earnings will also be spread amongst more investors. I’ll use this in my carnival stock analysis and give you a target share price you might not like.
United Airlines is one of the largest airlines in the world but down 61% in 2020. A bounce back to that level would mean a 104% return…if it can get there. All the airlines are hurting and United is only planning on about 40% flight capacity. To survive, it’s issuing billion in debt on top of government loan programs and has also issued new shares. If you’re investing in the airlines or thinking about it, you need to watch this United Airlines stock analysis!
Boeing stock is down 45% from the beginning of the year but was already down on its 737 Max issues last year. Now it’s in an existential struggle along with the airlines right at the time it needs to be paying down debt. Instead, Boeing issued billion debt and its sales are in jeopardy. Through my Boeing stock analysis, I’ll give you a stock price estimate that will surprise all but the most bearish investors.
2:15 Why these Cheap Stocks are Not Cheap
4:00 Carnival Stock Analysis
7:25 United Airlines Stock Analysis
10:14 Boeing Stock Analysis
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Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps.
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DISCLAIMER: It’s important to note that I am not a financial adviser and you should do your own research when picking stocks to invest in. These are just some of my viewpoints, by no means would I recommend watching one YouTube video and then immediately buying that stock. This video was made for educational and entertainment purposes only. Consult your financial adviser.
