Latest news with #RyanBrinkman
Economic Times
6 hours ago
- Business
- Economic Times
Tesla could take a major hit from Trump's Big, Beautiful Bill, analyst warns, and it might not be pretty
Tesla stock is stumbling again in June after gaining steadily in May and according to one top Wall Street analyst, the road ahead could get a lot bumpier, as per a report.A JPMorgan analyst warned that the latest legislation backed by US President Donald Trump, which is branded as the 'One Big Beautiful Bill Act', could pose serious financial risks for Tesla, according to The Street The proposed bill, currently gaining traction on Capitol Hill, could hammer Tesla's bottom line by eliminating key tax incentives and regulatory programs that have helped the company's profits, according to JPMorgan analyst Ryan Brinkman, reported The Street. While, Trump's economic policies usually benefit corporations and wealthy individuals, his newest bill might hamper 52% off Tesla's Earnings Before Interest and Taxes (EBIT), which is a key financial metric, as per the report. Brinkman estimated, that if the "One Big Beautiful Bill" is passed, it could lead the EV maker to take an additional $2 billion hit, amounting to abput 33% of its EBIT, reported The Street. The analyst highlighted that, 'The legislation would get rid of the $7,500 federal tax credit EV buyers receive, resulting in a $1.2 billion (19% of its EBIT) headwind for the company thanks to lower demand and margins,' quoted The Street. He also pointed out that, 'Additionally, [it] would outlaw the California Air Resources Board's ZEV program, which furnishes Tesla with regulatory credits. Without them, Tesla would have posted a loss last quarter,' as quoted in the report. Why is Tesla stock dropping in June? Because of fears surrounding new legislation that could slash federal EV incentives and eliminate regulatory programs Tesla benefits much could Tesla lose if the bill passes?An estimated $2 billion, which would be about 33% of its EBIT, according to JPMorgan.
Entrepreneur
7 days ago
- Automotive
- Entrepreneur
Goodyear Stock Surges 28% in 2025: Is More Growth Ahead?
Goodyear stock is up 28% in 2025, driven by investor optimism around its restructuring plan and insulation from new tariffs This story originally appeared on MarketBeat [content-module:CompanyOverview|NASDAQ:GT] At the market close on May 28, the S&P 500 remains statistically flat for the year. So it may not be saying much to point out that Goodyear Tire & Rubber Co. (NASDAQ: GT) is burning up the market in 2025. GT stock is up 28%, buoyed by a 22% increase in the last three months. Undeniably, there are more attractive choices among automotive stocks. Goodyear took on a significant pile of debt with its acquisition of Cooper Tire in 2021. That's stressed operating margins and earnings. It's also a big reason why GT stock is still down more than 5% in the last 12 months despite the strong rally in 2025. But this is no ordinary market. If investors are looking for opportunities, particularly if they have a contrarian mindset, GT stock may offer a compelling short-term opportunity. JPMorgan Just Issued a Bullish Price Target Goodyear delivered its first quarter 2025 earnings on May 7. The results were mixed. Negative earnings per share of four cents were better than the negative six cents forecast. However, revenue of $4.25 billion missed expectations for $4.51 billion. Both numbers were lower year-over-year (YoY). That's why it's significant to note that two weeks after the earnings report, JPMorgan Chase & Co. (NYSE: JPM) reiterated its Overweight rating on GT stock with a $17 price target. That was lower than its prior target of $18, but it's still 46% above the stock's closing price on May 28. It's also 21% higher than the consensus price target of $14. The reason for the upgrade is confidence in the company's restructuring plan. Analyst Ryan Brinkman believes that Goodyear's "Going Forward" plan, which kicked off in 2023, is ahead of schedule. The plan's goals call for $1.5 billion in savings, margin growth, and debt reduction. One way Goodyear is accomplishing those goals is by divesting itself of assets. So far in 2025, the company has sold off two major assets, which have helped the company raise nearly $1.4 billion in cash. In January, Goodyear announced it was divesting its assets in Dunlop. Then, in May, it announced the sale of a majority stake in Goodyear Chemicals to Gemspring Capital Management. The Company is Shielded from Tariff Troubles [content-module:Forecast|NASDAQ:GT] Goodyear's debt-to-equity ratio is down to 1.30. That puts it at a discount to its historical averages. However, cost-cutting will only get the company so far. A key reason for investor optimism is that Goodyear is insulated from tariffs. The iconic tire company has a strong manufacturing base in the United States. In its earnings report, Goodyear said that only 12% of its U.S. tire supply (accounting for 60% of its revenue) comes from non-USMCA countries. The sector average is 50%, putting Goodyear at a competitive advantage. This is a case where investors can put on their consumer hats. Vehicle owners know that in addition to death and taxes, tires are one of the most predictable expenses. They also know that tires don't come cheap. Goodyear won't necessarily come cheap, but without the burden of tariffs, it should have pricing power that could be accretive to market share. That's music to the ears of the current administration, which is pushing for a more protectionist approach to manufacturing, and it could give GT stock more room to run. At This Point, GT Stock is All About Growth Owning GT stock in 2025 is about stock price growth. Like many companies, Goodyear suspended its dividend in 2020. However, because of the company's current debt woes brought about by its acquisition of Cooper Tire in 2021, it hasn't reinstated that dividend. Goodyear is a contrarian play to be sure, but for investors looking to find an undervalued stock that may surprise to the upside, it may be a good year to own Goodyear stock. Before you make your next trade, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list. They believe these five stocks are the five best companies for investors to buy now... See The Five Stocks Here
CNBC
22-05-2025
- Automotive
- CNBC
JPMorgan says shares of this American tiremaker can rally 60% as tariffs hit competitors
JPMorgan is bullish on Goodyear Tire & Rubber , as the company is not only executing on its transformation plans but can also serve as a hideout from tariff pressures. Analyst Ryan Brinkman assigned an overweight rating to the stock. He also lowered his year-end price target by $1 to $17, but that still suggests shares could gain 61.9% from Wednesday's close. Hype has been building around Goodyear Tire's major transformation efforts , which were revealed after activist investor Elliott Investment Management took a stake in the company in 2023. Goodyear's "Goodyear Foward" two-year transformation plan ends in December, but is ahead of schedule for its benchmarks, the company has said. The plan includes implementing top-line and cost reductions of $1.5 billion, doubling operating income margin to 10% and significantly reducing the company's debt load. GT 1Y mountain Goodyear stock performance. Brinkman thinks these changes will lead to stronger earnings and greater debt deleveraging for the company. He also highlighted that Goodyear can manage tariff pressures better than rivals given its significantly U.S. manufacturing footprint. "There is the new kicker of potentially material price and/or share gains emanating from Goodyear's best-in-class positioning vis-à-vis recently imposed tariffs," the analyst said in a Thursday note to clients. "The higher earnings in combination with lower-than-expected Goodyear Forward restructuring costs contribute to a delevering process that is being significantly catalyzed by a strategy to dispose of non-core assets, which we assess is also running ahead of plan," he added. Analysts are split on Goodyear. LSEG data shows that of the 11 analysts covering the stock, six rate it a strong buy or buy, while five have a hold rating on shares.
Yahoo
14-04-2025
- Automotive
- Yahoo
1 Way Tariffs Could Cripple Ford for Investors
Detroit automakers can run but they can't hide from the potentially devastating impacts tariffs could have on their business. The stocks have been hammered all year long, some worse than others, and the true impact is yet to be felt. Amid the slew of analyst downgrades and lowered price targets there's a reality that is setting in for some investors: Tariffs could cause Ford Motor Company (NYSE: F) to alter how it returns value to shareholders. In other words, Ford may be forced to cut its coveted dividend. Ford has no doubt faced its share of challenges lately. The company is working to cut costs at the same time it's attempting to improve quality issues that have dinged the company's bottom-line through warranty costs. It has challenges in a tough Chinese market, and it's also burning through billions of dollars churning out each electric vehicle at a loss currently. Throw in the potential impact of tariffs and it's not farfetched to think that Ford may have to cut its lucrative dividend, which remains one of the largest reasons to own the stock. Ford's current dividend yield sits at a lofty 7.8% due to the stock's sell-off, and trades at a paltry price-to-earnings ratio of 5.8. "It is time to confront some hard truths, once more: vehicle tariffs have commenced, and parts tariffs are likely to follow within a month," wrote Bernstein analyst Daniel Roeska, according to Barron's. "We extend our company analysis to Ford and find significant downside not priced by the market yet." He could be exactly right when it comes to the downside not being priced into Ford stock yet. As you can see in the graph below, likely thanks to having more production capacity located in the U.S., Ford's stock has shed less value than its competitors so far in 2025. The good news is that Ford shouldn't have to cut the dividend right away, as the company has ample liquidity to wait and see if the tariff drama ends in the near term, one way or another. In fact, you can see in the graph below that Ford has steadily improved its cash position and can easily cover the dividend. The pain from the tariffs won't be completely felt through the 25% tariff on imported vehicles, but rather next month when another 25% tariff is expected to be slapped on imported automotive parts. For example, Ford produces about 82% of its U.S. sales domestically, but only about a third of its cars are built using domestic parts. The cost could end up being significant. J.P. Morgan analyst Ryan Brinkman wrote in a note to investors that the current tariff proposals could cost Ford around $6 billion -- rival General Motors fared worse with his estimated cost reaching around $14 billion. If there's anything to take away from this assessment, it's just how serious these tariffs could be. Not only could they affect Ford's bottom line, but if the tariff pain is extended long-term it could jeopardize the company's lucrative dividend. With that said, if the dividend is a core part of why you're considering owning shares of Ford, understand that it will always be a focus for the company. Even if it is temporarily cut to mitigate tariff costs, it will one day reach its full potential again as management is committed to returning value to shareholders in that manner. Before you buy stock in Ford Motor Company, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Ford Motor Company wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $679,900!* Now, it's worth noting Stock Advisor's total average return is 796% — a market-crushing outperformance compared to 155% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of April 5, 2025 Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool has positions in and recommends Tesla. The Motley Fool recommends General Motors and Stellantis. The Motley Fool has a disclosure policy. 1 Way Tariffs Could Cripple Ford for Investors was originally published by The Motley Fool Sign in to access your portfolio
Forbes
05-04-2025
- Automotive
- Forbes
Significant Mispricing Of Tesla Stock Usually Occurs During After-Market
WASHINGTON, DC - JANUARY 17: A Tesla showroom is seen in the City Center shopping center on January ... More 17, 2023 in Washington, DC. The automaker decreased the prices of their Tesla's by 20 percent, a move seen as a reaction to competition in the global market for electric vehicles and rising inflation rates. (Photo by) Tesla's stock price behavior is baffling to most analysts and investors. Media attention in major outlets such as the Financial Times and Bloomberg have been highlighting the stock price's strange twists and turns. The behavior of the company's stock price stems from its movements being at stark odds with underlying fundamentals. There are compelling reasons to infer that the price-fundamentals gap might be part psychological and part manipulation. Hyperbole is a psychological phenomenon. An article that appeared in the Financial Times explicitly mentions hyperbole as being one of Tesla's major assets. This article refers to after-hours traders parking fundamentals and instead trading on vibes. Consider the following line in the song 'I Dreamed a Dream' from the musical Les Misérables: 'But the tigers come at night, with their voices soft as thunder.' These tigers serve as a metaphor for market participants who are engaged in manipulative trading activities in the after-market. The Financial Times asks whether something else is going on with overnight trading in Tesla's stock, besides vibes. An article that appeared in Bloomberg discusses whether the 'something else' might be price manipulation by quantitative market-neutral trading firms. The alleged manipulation involves these firms inflating their portfolios around the opening of the market, and reducing the inflated positions around the same day close. JPMorgan analysts have been tracking Tesla's price-fundamentals gap for over a decade. The Financial Times interviewed its lead analyst Ryan Brinkman. Brinkman has been bearish on the stock for several years. His approach to fundamentals-based valuation centers on free cash flow analysis. Free cash flows are defined as the amount of cash a company generates in period of time (such as a year), which is available to be paid to both the company's debtholders and shareholders. The fundamental value of the company's stock is determined by the portion of the free cash flows available to be paid just to the shareholders. Morgan Stanley sell-side analysts also assess Tesla's price-fundamental gap using free cash flows. Notably, the Morgan Stanley analysts have been more bullish on Tesla's fundamentals than their JPMorgan counterparts. To see why, consider the chart below. The chart depicts the free cash flow forecasts developed in 2020 by the teams at the two firms, for the period 2020 through 2035. Notice that after 2021, the Morgan Stanley forecasts lie above the JPMorgan counterparts. Tesla's Free Cash Flows Over Time. Forecasts by JPMorgan and Morgan Stanley, 2020-2035, along with ... More actual values, 2020-2024. On a technical point, I should mention that analysts rarely report the values associated with the constant growth portions of their forecasts, called the 'terminal horizon forecasts.' I have constructed these values by using inferential formulas. Notably, most of Tesla's fundamental value relates to the terminal horizon. The free cash flow chart also displays the value of Tesla's actual free cash flows for the period 202 through 2024. In fact, the chart displays two actual free cash flow streams. The first is labeled FCF and the second is labeled FCF:Capex. FCF are the cash flows that conform to the definition of free cash flow provided above, namely the amount of cash a company generates over time, which is available to be paid to both the company's debtholders and shareholders. A key term in the formula for FCF is cash flow from investment. In practice, analysts use capital expenditure in place of cash flow from investment; and therefore, FCF:Capex does the same. The chart indicates that analysts at JPMorgan underestimated Tesla's FCF:Capex for the entire period 2021 through 2024, while the analysts at Morgan Stanley underestimated Tesla's FCF:Capex for 2021 and 2022, and overestimated FCF:Capex in 2023 and 2024. As for the period after 2024, a report in Seeking Alpha describes a pessimistic sales outlook for Tesla. The article emphasizes the damage to Tesla's brand, stemming from the role of Tesla's CEO Elon Musk in mass U.S. government layoffs. Extrapolating the FCF:Capex chart for the period 2025 through 2035 suggests that the JPMorgan and Morgan Stanley forecasts might both prove to be highly optimistic. Even more important is that the actual free cash flow stream, FCF, lies well below the FCF:Capex stream. In fact, FCF is negative for 2023 and 2024. This means that during 2023 and 2024, the direction of cash flow was from the debtholders and shareholders of Tesla to the company, not the reverse. In reality, both analyst teams overestimated Tesla's free cash flows in the years 2022, 2023, and 2024. The upshot of this free cash flow overestimation is that analysts have been overestimating Tesla's fundamental value for years. I made this point previously, in a post titled 'How Overvalued Is Tesla's Stock, Really?' As for hyperbole and psychology, I made this point in a post entitled 'Tesla's Powerful Narrative Is Propelling Its Stock Price.' Since mid-December, Tesla's stock has fallen by 51% at a time when the S&P 500 has fallen by 16%. Yet, as the Seeking Alpha article reminds us, Tesla's market cap still exceeds the combined market caps of Toyota, Ferrari, General Motors, Honda, Stellantis, and Ford Motor. The manipulation contention about Tesla's stock has been advanced compellingly by Bruce Knuteson, the CEO of Kn-X. The type of manipulation involves a trader increasing a security in his or her portfolio at the open, when liquidity is low, in order to drive up the price of the security. The trader then sells the security at the close, when liquidity is higher. Because of the difference in liquidity, the consequent decrease in price at the close is smaller in magnitude than the increase in price at the open, and so, as a result, the value of the trader's portfolio increases . Knuteson analyzed the difference between the behavior of Tesla's stock overnight, between the prior day close and the next day's opening, and the behavior during trading day between open and close. Traders who bought at the open and sold at the close, from the time Tesla went public in 2010, would have earned an average return of -2.7 basis points per trading session. Had they instead bought at the close and sold at the open, they would have earned, on average, 18.4 basis points per (after-market) session. The difference in returns is colossal. The chart below displays the cumulative effect of doing these trades daily, beginning in 2010. Ignoring trading costs, overnight trading results in an initial dollar investment being worth $1,145 today. In contrast, that same dollar invested intraday over the same period would have shrunk to 61 cents. Notice that the two series in the chart relate to different vertical axes. If both series were graphed using a single vertical axis, the (blue) intraday series would hug the horizontal axis. Cumulative returns to Tesla for the overnight (after-market) period and the intraday (trading ... More session) period. Because the trading day session is shorter than the after-hours session, it is reasonable to expect a higher return from the after-hours session. However, the numbers for Tesla clearly do not stem from a difference in trading session length. In addition, trading costs are large enough to prevent an arbitrage opportunity here. The Bloomberg article mentioned above points out that Knuteson has been arguing, for almost a decade, that the overnight trading puzzle is widespread and stems from market manipulation. The Bloomberg article also mentions a recent publication in the Journal of Investment Management by Victor Haghani, Vladimir Ragulin and Richard Dewey. Their work, which received the Harry Markowitz Best JOIM Paper Award this year, provides an explanation for the phenomenon based on the trading of 'meme stocks.' The 'meme stock' argument involves individual investors choosing stocks mostly when not at work and markets are closed, and placing trade orders to be executed at the open. In a rejoinder, Knuteson explains why he finds the meme stock explanation unconvincing. Indeed, he discusses a range of possible alternative explanations, and concludes that only manipulation can account for the full extent of the phenomenon. The two issues, price-valuation gap and manipulation, come together in interesting ways. During regular trading hours, it is as if traders fully appreciate that Tesla's stock price is overvalued relative to fundamentals. As a result, returns during trading hours are typically negative. In addition, the return standard deviations per session, are larger for intraday than overnight, 2.8% as opposed to 2.1%. This means that intraday trading features lower returns and higher volatility. In this respect, keep in mind that according to textbook theory, returns and risk should be positively correlated, not the reverse. This is one reason why behavioral finance, not traditional finance, is better at explaining the financial world. The same two issues come together in respect to persistence of the phenomenon over time, psychological denial, and private interests. In respect to the price-valuation gap, for almost two decades, analysts have resisted the contention that their free cash flow-based valuations are upwardly biased. I have documented this issue in JOIM, in the Journal of Portfolio Management, and on my Forbes blog. In respect to manipulation, Knuteson points out that the overnight return puzzle applies broadly, including to the S&P 500. In an email exchange with me, he reports the arithmetic means and standard deviations for each of the two S&P 500 SPDR ETF series, for the time period January 29, 1993 through March 31, 2025. These are respectively 4 basis points (mean) and 67 basis points (standard deviation) for overnight, and 0.5 basis points (mean) and 96 basis points (standard deviation) for intraday. The difference in means, when compounded, are colossal. Knuteson asks why this phenomenon, which is stark, widespread, and documented, has gained such little attention from regulators, academics, and investors. The Bloomberg article applies the term 'conspiracy theory' to the manipulation claim. In his rejoinder to the Bloomberg article, Knuteson makes the following remarks, where references to [8], [2022], and [2023] refer to his posts and other comments. 'By far the biggest conspiracy here is the years-long decision by regulators, other government officials, economists, journalists, finance industry professionals, and others to hide these strikingly suspicious return patterns and the apparent absence of any innocuous explanation for them from the public at large. This conspiracy is genuinely astounding. But it isn't a theory. It is an objective, indisputable fact. I have extensively documented it (including in the public thread with the SEC and others made available with [2023]). The years-long hiding of these strikingly suspicious return patterns from the public is a historic conspiracy regardless of what the correct explanation for these suspicious return patterns turns out to be. The aspect of this problem most deserving the term "conspiracy" is the indisputable fact that the public at large still (still!) has absolutely no idea these suspicious return patterns that nobody can innocuously explain even exist [8]. Of course, as I point out in [2023] and elsewhere, this well-documented, objectively factual, undisputed, still (still!) ongoing "conspiracy" requires no large, secret, sinister network -- just a bunch of people with bad incentives who lack the integrity to do the right thing.' Cognitive dissonance, motivated reasoning, and the pressure to conform are powerful psychological forces that can prevent people from accepting the truth. Cognitive dissonance is about resolving conflicts in information by choosing what is most comfortable. Motivated reasoning is about rationalizing such a choice, when that comfort is connected to incentives. The pressure to conform is about the discomfort that comes from expressing dissent within a group. Hyping stocks and overvaluation relative to fundamentals leads people to feel more comfortable than if stocks were fairly priced. Ignoring the price-valuation gap can be viewed as cognitive dissonance. Ignoring that the bulk of stock returns arrive in the dark of night is a form of motivated reasoning. As for the pressure to conform, Knuteson suggests the following about those working for firms engaged in the alleged manipulation. 'at some point, a quant who has been around long enough has acquired a sufficiently informed understanding of the group's activities to recognize the problem and its serious implications. Most quants at that point won't speak up -- social pressure, good pay, the plausible deniability afforded by willful blindness, and the absence of an obviously effective way to address the problem will together be more than enough to keep almost anyone quiet.' The valuation of Tesla is fascinating, and in respect to psychological forces at work, it is just the tip of the iceberg.
