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On Friday, RBC Capital Markets adjusted its stance on Magna International Inc. (NYSE:MGA), downgrading the stock from Outperform to Sector Perform and slashing the price target to $32.00 from the previous $51.00. The stock, currently trading at $32.13, appears undervalued according to InvestingPro analysis, with analyst targets ranging from $31 to $56. The revision reflects a more conservative outlook by the firm due to a reduced production forecast, which in turn has led to a lower expected EBIT for 2025, now estimated at $1.9 billion, down from $2.1 billion.
The firm's analysts have also modified their sum-of-the-parts (SOTP) valuation multiple to 4x from 5x, aligning with the trading levels of Magna's peers. The new multiples include a reduction for the Body Exteriors & Structures (BE&S) segment to 5x from 6x, while the Power & Vision (P&V) segment remains at 4x, and the Seating and Complete Vehicles (CV) segments have been decreased to 2x from 3x.
The reassessment of Magna's stock by RBC Capital comes after considering the current macroeconomic environment, which has influenced the firm's expectations regarding potential strategic moves by the company. Specifically, RBC Capital no longer anticipates the sale of Magna's Seating business to be a priority for the company's management, despite previous supplier announcements suggesting such asset dispositions might be forthcoming.
The downgraded rating and lowered price target indicate a shift in RBC Capital's perception of Magna's near-term prospects. The stock's new Sector Perform rating suggests that the analysts now view Magna's shares as likely to perform in line with the average returns of the sector, rather than outperforming the market as previously expected. With annual revenue of $42.84B and a "GOOD" financial health score from InvestingPro, which offers comprehensive analysis and 12 additional ProTips for this automotive components leader, investors can access deeper insights to make informed decisions.
In other recent news, Magna International Inc (TSX:MG). has filed its annual report with the Securities and Exchange Commission, providing a detailed account of its financial performance for the year ending December 31, 2024. The report includes audited financial statements and management's analysis, with Deloitte LLP confirming the accuracy of these documents. In analyst updates, JPMorgan has adjusted Magna's stock price target to $53 from $55, maintaining an Overweight rating due to the company's competitive valuation and strong sales growth prospects. Meanwhile, Raymond (NSE:RYMD) James has reduced the price target to $50, citing caution due to potential trade and tariff impacts, while keeping a Market Perform rating. Additionally, Scotiabank (TSX:BNS) has lowered its price target to $49, retaining a Sector Perform rating, and notes Magna's cost-cutting measures and share repurchase activities. These developments reflect Magna's efforts to navigate industry challenges and maintain financial stability.
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