On Monday, Magna International Inc. (NYSE:MGA), a leading automotive supplier, experienced a change in stock rating by Evercore ISI. The firm downgraded the company from 'Outperform' to 'In Line'. Accompanying the rating change, the price target was adjusted to $62.00 from the previous target of $75.00.
The downgrade was influenced by challenges related to Fisker Inc. (OTC:FSRN)'s (FSR) headwinds. These include issues with warrant ownership and production volumes at Magna Steyr, a subsidiary of Magna International that provides contract manufacturing services.
The lowered price target reflects these concerns, with Evercore ISI basing the new target on approximately 8 times the projected earnings per share (EPS) of more than $7.50 for the year 2025.
Magna International's involvement with Fisker Inc. has been a point of interest for investors, as the automotive supplier holds warrants in the electric vehicle manufacturer. However, the current market conditions have led to reassessments of such strategic partnerships and their expected contributions to Magna's financial performance.
The revised price target of $62.00 is a significant shift from the prior estimate and suggests a more conservative outlook on Magna's growth prospects. This adjustment is a direct response to the anticipated impact of the aforementioned headwinds on the company's future earnings.
InvestingPro Insights
In light of Evercore ISI's recent rating change for Magna International Inc. (NYSE:MGA), it is pertinent to consider additional metrics and insights that could inform investors' decisions. According to InvestingPro data, Magna International is trading at a P/E ratio of 11.77, which is considered low relative to its near-term earnings growth. This suggests that the stock may be undervalued, offering a potentially attractive entry point for investors. Additionally, the company has demonstrated a robust track record of dividend reliability, having raised its dividend for 14 consecutive years and maintained payments for 33 consecutive years.
Despite challenges, Magna is a prominent player in the Automobile Components industry and is expected to remain profitable this year. The company's revenue has grown by 13.1% over the last twelve months as of Q1 2023, indicating a strong financial performance. Nevertheless, it is worth noting that Magna's gross profit margins are relatively weak at 13.11%, which could be a point of concern for investors focused on profitability metrics.
For those interested in deeper analysis, InvestingPro offers additional insights and tips that could be valuable. For instance, Magna is currently trading near its 52-week low, which may present a buying opportunity for long-term investors. Subscribers can find more InvestingPro Tips by visiting the Magna-specific page at https://www.investing.com/pro/MGA. To enhance your investing toolkit, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With more tips available on InvestingPro, investors can gain a comprehensive understanding of Magna's investment potential.
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