Garrett Motion Inc.

Garrett Motion Inc (NASDAQ: GTX) is a Switzerland-based automotive technology company.  For original equipment manufacturers (OEMs) of light and commercial vehicles as well as the aftermarket, the company creates, produces, and distributes electric and turbocharger boosting technology.

Key Highlights

• On June 22, 2022, Garrett Motion Inc. announced that it will redeem all outstanding shares of Series B preferred stock. Even in a turbulent climate, the firm will be able to attain a substantial deleveraging milestone because of persistently excellent cash flow generation and great operational agility throughout Garrett's entire product line.
• In comparison to the first quarter of 2021, which had net sales of USD997 million, the first quarter of 2022 saw net sales of USD901 million, a fall of 10%. With the negative impact of the foreign currency translation removed, net sales in constant currency fell by 6%.
• Gross profit decreased to 19.4% from 19.7% in the first quarter of 2021 primarily because of lower sales volume, inflation related to transportation and commodities, higher premium freight costs brought on by supply chain disruptions, higher R&D costs, and foreign exchange effects. Gross profit for the first quarter of 2022 was USD175 million compared to USD196 million in the first quarter of 2021.
• Compared to a loss of USD105 million in the first quarter of 2021, net income for the first quarter of 2022 was USD88 million. The positive non-operating expenditure of USD54 million and reduced reorganization charges, net of USD173 million, which were offset by a USD21 million decrease in gross profit, accounted for most of the rise of USD193 million.
• Due to an increase in net income, net deferred taxes, and non-cash gains attributable to reorganization items of USD157 million, net cash supplied by operating activities increased to USD73 million in the first quarter of 2022 from USD32 million in the first quarter of 2021.
• Garrett had USD788 million in liquid assets as of March 31, 2022, which included USD473 million in undrawn obligations under its revolving credit facility and USD315 million in cash and cash equivalents.
• The total debt, which includes the Series B Preferred Stock, was USD1,412 million as of March 31, 2022, down from USD1,618 million at the end of the fourth quarter of 2021.

Stock recommendation

GTX's stock price has increased by 36.68% in the past month and is currently in the upper end of its 52-week range of USD5.61 to USD8.59.  As can be seen in the chart below, the price is currently above both the short-term (50-day) SMA and long-term (200-day) SMA, with RSI at 64.52. The RSI has corrected from the overbought zone and is currently forming a bearish divergence on top, which can create a possibility of a downward movement in near future.

Given the stock's considerable momentum in the past month, financial results, and technical analysis, we propose a "Watch" rating on the stock at its current price of USD 7.89, down 2.17%, as of June 23, 2022, at 12:30 PM PDT.

One Year Technical Chart, as of June 23, 2022, at 12:30 PM PDT. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

* Current price as of June 23, 2022, at 12:30 PM PDT.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.