Magna International (TSX:MG) used to look like it was perhaps one of the best buys on the market. Shares soared as the world started the transition to electric vehicles (EV), with Magna stock supporting this growth in numerous ways.
However, Magna stock has since dropped further and further down. Shares of the company are down 8% in the last year, and 10% year to date. So how long until the stock recovers to former highs, if ever?
Why the fall?
Magna stock dropped mainly due to supply-chain issues. As with many companies out there, supply-chain disruptions hurt the stock. However, this seemed to be something that the company just couldn’t bounce back quickly from.
In fact, as recently as February, Magna stock saw a drop of 15% as financial results for its recent earnings came in lower than expectations. It was expected that 2022 would see supply disruptions “clear up,” yet that simply wasn’t the case. The auto producer continues to face “significant inefficiencies,” according to its chief executive officer.
Therefore, the end of the year results were quite disappointing. Earnings came in at US$95 million, down from US$464 million the year before. However, sales at least were up to US$9.6 billion compared to US$9.1 billion the year before.
Outlook looks more promising
While it’s unclear what the future will hold, Magna stock remains positive about the future. The company reported that it expects more improvements throughout this year and through to 2025. By that time, volatility and other pressure will lessen.
Yet to be clear, the recovery won’t be quick. Poor market conditions coupled with these disruptions certainly don’t make for an ideal scenario. Still, since that time there have been a few positives notes for investors to look towards.
Most recently, Magna stock was awarded a new battery enclosure facility in Brampton, Ontario. This was part of a $470-million expansion project across the province. The initiative would help support the Ford F-150 Lightning, and adds to other growth projects in Guelph, Belleville, Newmarket, Windsor, and Penetanguishene.
Bottom line
It’s going to be a difficult few years for Magna stock. Yet, it cannot be denied that the future of EVs will depend a lot on companies like it. Magna stock has been expanding and creating joint ventures with the support of major car manufacturers and the Canadian government behind it. So if you’re looking for a deal on a stock to hold for the next decade, this could be one to consider. Especially with a dividend yield at 3.52% as of writing.
However, if you’re hoping for a quick recovery, that is definitely going to take more time. The company believed before it would reach normal levels in 2022. Now it’s unclear whether that will happen even in 2023. Therefore, investors looking for a stock to hold over the next three years may want to keep Magna stock merely on their watchlist for now.
