Down by 27%: Should You Buy Magna International (TSX:MG) Stock Today?

This top auto parts maker stock is down by a considerable margin, and it could make for a good value bet at current levels.

| More on:
calculate and analyze stock

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The market pullback has been devastating for investment returns across the board. The S&P/TSX Composite Index is down by 8.56% from its March 2022 high, and many investors are panicking. Savvier investors with a long-term investment horizon might look at the downturn as an opportunity to pick up shares of undervalued stocks at attractive discounts.

Magna International (TSX:MG)(NYSE:MGA) stock saw its share prices take a massive hit this year. At writing, the auto parts manufacturer stock trades for $78.86 per share, representing a massive 27.69% year-to-date decline.

The stock has started gaining some momentum on the stock market again. Magna International stock climbed by 6.54% between May 12 and May 20, 2022. However, it is still down by almost 30% from its January 17, 2022, high. Volatility in the stock market will likely continue to make investors wonder whether the stock could be worth adding to their portfolios today.

Let’s take a better look at what is happening with Magna International stock to help you make a more informed decision on investing in the stock.

What caused the decline?

Magna stock is one of the many growth stocks that benefitted from the surge in demand for electric vehicles (EVs). The company produces vehicles itself, but its partnerships with some of the biggest EV makers worldwide propelled its performance, as evidenced by its stellar growth in the last year. Additionally, the company has more joint ventures designed to help it leverage the EV boom.

The company has also expanded into internal combustion engine vehicles to take advantage of near-term growth. Magna has been facing issues with the semi-conductor shortage impacting its revenues. The semi-conductor shortage limits the company’s room for growth.

Was Magna stock oversold?

Magna International stock’s 52-week high valuation was a massive $126. Trading for less than $80 per share at writing, the auto parts manufacturer saw a substantial decline in its share prices. Many analysts believe that the stock was oversold.

Considering the overall macroeconomic situation and broader economic uncertainty, Magna stock could be expected to face further challenges in the short term. However, investors believe that it could outperform the broader market at current levels. The company is wading through the pressures created by the global semi-conductor shortage and geopolitical tensions.

However, the demand for its service remains high, and its long-term prospects appear to be solid. It could be a great value bet for long-term investors seeking high-quality assets for their portfolios at discounted share prices.

Foolish takeaway

Stock market investing is inherently risky, and investing in growth stocks might not be ideal during volatile market conditions.

Analysts predict that Magna International stock could make a significant recovery in the coming years due to strong demand for EVs.

If you are willing to assume the risk and stomach the short-term volatility that might lie ahead for Magna International stock, it could be worth adding to your investment portfolio today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Adam Othman has no position in any of the stocks mentioned. The Motley Fool recommends Magna Int’l.

More on Dividend Stocks

analyze data
Dividend Stocks

2 Safe Dividend Stocks That Could Help You Fight Inflation

A dependable stream of passive income is one way to help offset rising inflation rates. Here are two top dividend…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Stay Invested in a Recession: Increase Positions in 2 Value Stocks

The suggestion of market analysts is to increase positions in two value stocks if you want to stay invested amid…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Dividend Stocks to Buy as Inflation Surges in Canada

If you're worried about how surging inflation may impact your portfolio, here are three of the best dividend stocks to…

Read more »

You Should Know This
Dividend Stocks

High Inflation: The Good and the Bad for Canadians

Consider tucking away some of your long-term savings in quality dividend stocks like Brookfield Infrastructure in this correction.

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

TFSA Investors: Turn $1,000 Into $10,000 in 10 Years

10-fold growth within a decade is rare but not unheard of. You can capture this growth either by predicting a…

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

1 Oversold REIT Stock to Buy for Safe Dividends

If you're looking for stable dividend income from an oversold stock, this office REIT is a perfect option.

Read more »

edit Real Estate Investment Trust REIT on double exsposure business background.
Dividend Stocks

3 Cheap Canadian REITs to Buy in 2022

Are you looking for passive income? Start treasure digging in cheap Canadian REITs in this market correction!

Read more »

Dividend Stocks

TFSA Passive Income: 3 Undervalued, High-Yield TSX Dividend Stocks to Buy Now

These top TSX dividend stocks with high yields now look attractive to buy for TFSA passive income.

Read more »