Magna (NYSE: MGA) is a buy according to Goldman
According to Goldman Sachs, the contract manufacturer Magna International could be a smart bet for investors who are not sure what electric vehicles are going to take off.
“We believe its broad set of capabilities (in both auto systems and manufacturing) position it well to be a key provider for new market entrants,” according to the note.
Magna is already involved in the production of electric vehicles for a number of companies, including Jaguar’s I-Pace. The company also has an agreement with the start-up Fisker.
According to Goldman, Magna’s industry presence allows it to layer in more profitable services in the future.
“While pure assembly is a relatively low margin business, it can also provide opportunities to sell higher-margin solutions tied to key secular themes,” according to the note.
Goldman raised its price target on Magna from $97 to $120 per share. The new target is 29% higher than the stock’s closing price on Wednesday.
Deutsche Bank upgrades MGM (NYSE: MGM)
According to Deutsche Bank, MGM Resorts has not received enough credit for the strength of its casinos as Las Vegas reopens.
According to Deutsche Bank, one reason for profit growth will be lower labor costs.
“We believe the next leg of MGM’s stock story will be one of improving margins that extend well beyond the ‘over 30 percent’ targets management has discussed as the LV Strip goal, as well as the 32.5 percent peak margins of 2006,” the note stated.
Santarelli also mentioned “continued improvements in Las Vegas, with the outlook further bolstered by improving group trends and a Raiders season with fans in the stadium.”
To be sure, the analyst upgraded despite becoming more bearish on MGM’s online betting unit’s valuation.
“We see our year Consensus as being too low and, as a result, the perceived embedded sports / iCasino valuation as being too high,” according to the note.
Deutsche Bank raised its price target for the stock from $42 to $54 per share. The new target is 25% higher than the stock’s closing price on Wednesday.
Tesla is back (NASDAQ: TSLA)
This is the daily notebook of Mike Santoli, the senior analyst for CNBC’s markets, including thoughts on trends, inventories and market data.
The rebound and break to new highs after previous pullbacks have not always achieved escape velocity, and have frequently retraced some or all of the upside break, but it at least keeps the general uptrend in place. For the time being, a low-volatility grind higher ahead of potentially noisy mechanical reshufflings before the end of the quarter.
Treasury yields are firmer, but not significantly so, following a batch of good but not spectacular economic data and relatively reassuring Fedspeak on inflation.
What appears to be a revival of the growth-stock complex is, in fact, just another convergence of cyclicals and secular growth in a less binary market than in previous months. Here is a weighted average of industrials and financials versus FAANMG and software.
The apparent infrastructure bill deal appears to be large enough to move the needle a little on large capital projects, but not large enough to change assumptions about the deficit, Treasury supply/demand, and so on. Or to change the setup for a reasonable amount of “fiscal drag” in 2022. (decline in the net fiscal contribution to the economy).
S&P earnings for 2022 are still rising and have surpassed $215. By then, we’ll most likely be back to the usual pattern of year-ahead EPS forecasts being too high rather than too low, but the consensus can continue to rise, causing downward revisions to occur from higher levels. The market appears to be 20 times the number for next year. Still a full valuation and vulnerable to changes in yields or credit spreads, but not insane on the surface.
Market breadth has been a laggard in the recent S&P rally, but it is beginning to make up for lost ground today. The advance-decline line needs to catch up (chart from this morning via Instinet):
The games have resumed in Tesla. Massive bullish call option flow has aided the stock’s rise after it made a multi-part stand near $600. Whether it’s crypto money looking for a new hot table to bet at or simply a mean-reversion move as attention returns to upcoming sales figures, the stock is now nearly back to where S&P index-fund investors were forced to buy it last December. According to those who follow such things, the options tailwind appears to be weakening near $700.
Today’s breadth is strong, with more than a 2:1 up:down ratio on the NYSE and close to that on the Nasdaq. Volumes are low, but it’s summer, and calm rallies are the norm in bull markets.
This morning, the VIX briefly fell below 15 for a brief moment, setting a new cycle low. Confirms/backs up market action without predicting the next big move.
