Magna International Inc T.MG

Caught in European shortages

[Dibah420]

March 2, 2022 | 17:17 ET~ Magna International MGA-NYSE MG-TSX Rating Outperform Price: Mar-2 $70.16 Target ↓ $89.00 Total Rtn 29% I
mplications of Ukraine/Russia Conflict Bottom Line: Magna's stock, with the rest of the auto sector, saw a sharp decline March 1. While Magna's direct exposure to the conflict in Ukraine/Russia is not meaningful, we believe the issue is that about 40% of Magna's auto parts sales are to European OEMs.
Over recent days, Europeans OEMs announced production stoppages due to a shortage of parts supplied from Ukraine/Russia.
Reports have also cited concerns regarding a shortage of neon gas, which is crucial for manufacturing semiconductor chips, as Ukraine is the world's largest supplier. Lowering target to $89.
Key Points On March 1, Magna's stock, along with the rest of the automotive sector, saw a sharp decline. Despite a sell-off across the industry, we note that the decline for Magna was among the highest in the sector, with the stock closing the day down about 8%. We believe the entire automotive sector traded down due to the ongoing conflict in Ukraine and Russia. We note that Magna does not have any plants in Ukraine. The company does have operations in Russia, but they account for only 1% of Magna's total sales. This implies an insignificant direct exposure to the conflict in Ukraine/Russia for Magna.
However, we believe the issue lies in the fact that about 40% of Magna's auto parts sales are to OEMs in Europe (mostly Western Europe). This would include OEMs like BMW, Volkswagen, Mercedes, as well as some French OEMs. Over recent days, OEMs have cited issues relating to the supply of parts from Ukraine and Russia. Volkswagen, for example, stated that the company will idle some production lines in two of its plants in Germany before completely halting production there in the following week.
BMW noted that it expects temporary shutdowns due to shortages of parts, and the company will be suspending vehicle exports and local assembly in Russia due to its invasion of Ukraine. While Mercedes has not yet announced any production halts, the company is carefully monitoring the situation.
Several reports have also cited concerns regarding a shortage of neon gas, which is crucial for manufacturing semiconductor chips, as Ukraine supplies a significant portion of the world's Neon gas demand. This issue is highly significant as our thesis for Magna was based on the notion that the semiconductor shortages would ease as we progress through 2022 which would improve industry

[StockGiba]

I think a classic over reaction/heavy short attempt.  

[STOCKWIZ]

Wayyyy oversold. I agree. Lots of pent up demand for vehicles. It's all about the Ukraine right now. We'll see.

[Tommy123]

This post has been removed in accordance with Community Policy

[jcjohn36]

Lol, that's a joke right - to early to see if Magna will survive this?? Back up the truck today and you will be richly rewarded in a year.