What’s Ahead for Magna International Stock?

Magna (TSX:MG) stock went from all-time highs to massive lows, with the stock still down 11% in the last year. But now could be the time to buy.

| More on:
stock data

Image source: Getty Images

There are many companies that have gotten over the hurdle of supply-chain disruptions. Yet Magna International (TSX:MG) is not yet one of them. Magna stock continues to find it difficult to get supply up to demand, and it’s caused the stock to remain far below the TSX today.

Does that mean investors should get out? Or does it present an opportunity? Today, let’s look at Magna stock to see what’s in store this year and beyond.

What happened?

Magna stock continues to adjust its future expectations, with the company providing guidance lower than originally stated. This comes as the company continues to find it difficult to gain momentum in terms of its supply.

The company reported at the end of January that it now expects to reach adjusted earnings before interest and taxes (EBIT) of about 4.3% for 2022. This is far below the expected 4.8% and 5% announced back in November 2022.

Preliminary results suggest the company will reach about US$37.8 billion in sales for 2022, which did indeed fall within its US$37.4 and US$38.4 billion guidance. Yet the company still has yet to put out its earnings report, which is expected out on Feb. 10.

Shares dropped at the lowered expectations, with the company down about 12% in the last year. And yet, as earnings draw closer, shares have increased by 15% since the beginning of 2023. So, what are investors hoping for?

Analysts on board

It could come down to the future of the industry, as it always does, especially with analyst support. Many had downgraded Magna stock on the TSX, but those analyst ratings are now bouncing back upwards. The biggest support for this is Magna stock’s investment in the future of cars. With an acquisition of Veoneer Active Safety, as well as partnerships to provide more electronic components, it looks like Magna stock is set up for the shift to electric vehicles.

This is incredibly helpful given that in the past, auto parts sales tend to be pretty cyclical. There is now time for massive growth in the shift to electric vehicle parts. This should help offset the lower production levels, which led to this decline in share price, according to analysts.

But is it valuable?

Shares of Magna stock trended upward when President Joe Biden came into office, making sweeping announcements about the future of electric vehicles. While the future is uncertain, it led to an incredibly big jump in share price.

After reaching those highs in June 2021, shares fell until October of last year, when a climb has been happening ever since. It’s a slow climb, but a climb, nonetheless. And, frankly, Magna stock now looks well valued on the TSX today.

Yet that doesn’t mean you should ignore the stock or wait for a drop. Over the last decade, Magna stock has climbed by 318% to where it is at the time of writing. That’s a compound annual growth rate of 15.4%! Meanwhile, it offers a dividend yield of 2.77% as of writing as well. So, you can look forward to this growth and dividends in the years to come. That’s something you won’t want to wait around for.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Magna International. The Motley Fool has a disclosure policy.

More on Investing

Man holding magnifying glass over a document
Stocks for Beginners

TFSA Investors: Make Your Recession Watchlist Now!

These long-term stocks offer immense value for TFSA investors looking to create immense returns coming out of a recession.

Read more »

Profit dial turned up to maximum
Dividend Stocks

2 TSX Dividend Stocks With Seriously Huge Payouts

The TSX telecom sector has some great high-yielding companies up for grabs.

Read more »

TFSA and coins
Dividend Stocks

Dividend Stocks With Yields TFSA Investors Should Lock In Now!

Are you looking to build a passive-income stream? Here are two top dividend stocks to load up on in your…

Read more »

Gas pipelines
Energy Stocks

Better Energy Stock to Buy: Suncor or Canadian Natural Resources?

Suncor and Canadian Natural Resources are off their recent highs. Are these stocks now good to buy?

Read more »

tsx today
Stocks for Beginners

TSX Today: What to Watch for in Stocks on Thursday, March 23

TSX stocks may remain volatile, as investors continue to assess how the high interest rate environment could affect the economy…

Read more »

A plant grows from coins.
Dividend Stocks

2 Young TSX Stocks You’ll Be Glad You Bought in 10 Years

Youth means nothing when you plan to hold strong companies long term. These two TSX stocks should therefore be first…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

Is it a Trap? 3 TSX Stocks With Ultra-High Dividend Yields 

Who doesn’t love dividends? But the high-interest rate environment makes ultra-high dividends unsustainable. Are these stocks a value trap?

Read more »

Value for money
Dividend Stocks

3 Value Stocks for Superior Returns in 2023

Given their solid underlying businesses, stable cash flows, high dividend yields, and attractive valuations, these three undervalued TSX stocks could…

Read more »