The Goodyear Tire & Rubber (GT) appears to be under a twin threat; One from the impact of COVID-19, the other from… the President of the USA.
Trump seems to have gotten another bee in his coiffured bonnet, this time about what he considered to be Good Year’s appropriation of “cancel culture.” So, Trump has decided to cancel Good Year as a retaliatory measure.
Specifically, Trump has called on his supporters to boycott Good Year after the company has banned hats bearing his campaign phrase “Make America Great Again,” or MAGA. Conversely, clothing containing “Black Lives Matter” and gay rights slogans are deemed acceptable by the company. Good Year management explained that in contrast BLM and LGBTQ attire, MAGA accessories fall “outside the scope of racial justice and equality issues”.
In a news conference on Wednesday, when questioned on the matter, Trump refused to budge, comparing the $2 billion valued tire company to a Marxist group.
Communists or not, it appears the “China Virus” hasn’t spared Good Year from its impact. According to US Department of Transportation data, road travel in the US declined by 26% year-over-year in May. Additionally, total spending on ridesharing in the US dropped by more than 75% year-over-year in June, as per data from Second Measure.
To Nomura analyst Anindya Das, what this indicates for the medium term, is a lack of demand for Good Year tires.
“We now think that the work-from-home (WFH) policies put in place to arrest the spread of infection are unlikely to be terminated anytime soon,” Das said. “Thus, replacement demand in the medium term could remain depressed, in our view.”
Nevertheless, since bottoming out on March 18, Good Year shares have appreciated by over 100%, as investors have cheered on the company’s “good cash flow and cost management,” causing the stock to significantly outperform its peers.
However, at the current share price, Das argues the stock is no longer undervalued. Therefore, the analyst rates GT a Neutral (i.e. Hold), citing “limited upside potential from here.” Indeed, Das’ $10 price target suggests a modest upside of 5.5% from current levels. (To watch Das’ track record, click here)
Wall Street backs Das’ caution here, as TipRanks analytics reveal GT as a Hold. Based on 5 analysts polled in the last 3 months, 1 rates the stock a Buy, 3 say Hold, while 1 suggests Sell. Yet, the 12-month average price target stands at $12.33, marking a 30% upside from where the stock is currently trading. (See Good Year stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
