Market Overview

Leveraged ETF Gets A Lift UBS's Boeing Upgrade

Share:
Leveraged ETF Gets A Lift UBS's Boeing Upgrade

Shares of The Boeing Company (NYSE: BA) surged 4.29 percent on above-average volume last Thursday after UBS upgraded the stock while issuing a major upward price target revision.

UBS upgraded Boeing, the largest component in the Dow Jones Industrial Average, to Buy from Neutral with a price target of $515. That is well above the stock's Thursday closing price of just under $346.

What Happened

Not surprisingly, the Boeing upgrade sent the broader aerospace and defense complex higher yesterday. The Dow Jones U.S. Select Aerospace & Defense Index, a benchmark in which Boeing is the largest component with a weight of over 10 percent, gained 1.38 percent and has since added an extra 1.5 percent to that, in tune with Boeing's own 2 percent climb.

That's good news for the Direxion Daily Aerospace & Defense Bull 3X Shares (NYSE: DFEN). DFEN, the only leveraged aerospace and defense exchange traded fund (ETF), looks to deliver triple the daily returns of the Dow Jones U.S. Select Aerospace & Defense Index. DFEN gained over 4 percent on Thursday.

Why It's Important

“We believe Boeing shares carry the best upside in the sector with much of the cash growth and margin expansion story set to be unlocked with our $31 per share (free cash flow estimate for 2020),” which is 15% ahead of consensus, said UBS analyst Myles Walton.

A breakout for Boeing, assuming that scenario materializes, could renew interest in DFEN. Data suggest that for the week ending Aug. 15th, volume in the leveraged defense ETF was declining. While it is a leveraged ETF and not intended for use over long holding periods, DFEN generally does a solid job of sticking close to its underlying index. Over the past month, DFEN's variance from that index is just -0.93 percent, according to issuer data.

What's Next

“We believe Boeing shares carry the best upside in the sector,” said Walton. “Much of the cash growth and margin expansion story (is) set to be unlocked with our $31 per share in free cashflow estimate for 2020, 15 ahead of consensus.”

DFEN could catch a bid if Boeing is able to rally through the $365 area and make a new 52-week high from there.

Related Links:

A New China Healthcare ETF.

Tempting Fate With a New Gold ETF.

 

Related Articles (BA + DFEN)

View Comments and Join the Discussion!

Posted-In: Analyst Color Long Ideas News Sector ETFs Upgrades Price Target Analyst Ratings Trading Ideas

Latest Ratings

StockFirmActionPT
MSFTStifelMaintains245.0
TXRHJP MorganMaintains67.0
SBUXJP MorganMaintains82.0
MCDJP MorganMaintains220.0
CMGJP MorganMaintains1,115.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com