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It hasn’t been a pleasant 2024 for vehicle parts maker Magna International (NYSE:MGA), who also happens to be the contract manufacturer for the struggling Fisker (OTCMKTS:FSRN). Magna produces the Fisker Ocean, an electric vehicle (EV) SUV.
Magna CEO Swami Kotagiri disclosed in the company’s first-quarter earnings call that “production of the vehicle is currently idled” and that Magna’s guidance “assumes no further production” of the Ocean.
As a result, 2024 revenue guidance was lowered by about $400 million, while adjusted EBIT margin is expected to incur a 25 basis points reduction. The two companies had previously planned to produce up to 120,000 Oceans annually.
Fisker’s troubles were amplified following the release of a scathing video review titled “This is the Worst Car I’ve Ever Reviewed” from tech reviewer Marques Brownlee, alleging a plethora of issues related to the key fob, Bluetooth and sensors. A lack of demand due to a lack of trust later led to defaults on debt and a delisting from the New York Stock Exchange.
MGA Stock Receives Price Target Reductions Following Fisker Crisis
In 2023, Fisker built a total of 10,193 Oceans. Unfortunately, the company only delivered 4,929 of them, or less than half of its annual production. As of March 15 of this year, production totaled 1,000 vehicles, deliveries were 1,300 vehicles and inventory was 4,700 vehicles. That inventory was worth over $200 million according to internal estimates. However, the inventory estimate was made before the company announced price cuts of up to 39% on its Ocean trims.
Now, Magna is feeling the impact of Fisker’s woes. Following the company’s earnings, at least six firms lowered their price targets for MGA stock:
- BMO Capital analyst Tamy Chen lowered to $60 from $65.
- Barclays analyst Dan Levy lowered to $60 from $62.
- Scotiabank analyst Jonathan Goldman lowered to $55 from $59.
- UBS analyst Joseph Spak lowered to $51 from $56.
- Wells Fargo analyst Colin Langan lowered to $49 from $52.
- Goldman Sachs analyst Mark Delaney lowered to $48 from $56.
MGA stock is down by 21% so far this year and is currently trading near its 52-week low of $45.99.
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On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
