Thursday, March 14, 2019

Valeo Hits The Wall, And The Wall Falls On Top Of It

The last year was a tough one for auto parts suppliers in general, particularly after midyear and especially for European suppliers, but it was an abysmal year for Valeo (OTCPK:VLEEY) [VLOF.PA] as the shares lost about half their value on successive miss-and-lower quarters that eventually saw management's outlook for 2019 erode from double-digit growth to low single-digit growth with lower margins.

I don't believe that Valeo is fundamentally broken, but investor confidence in management clearly is, and I can't say that that is unfair. The magnitude of the guidance revisions has been significant, as has been the discrepancy with order growth and the large order write-off in China, all of which leads to ample uncertainty about the company's outlook. While I do believe that Valeo has assembled a very strong position and platform for electrification, that assembly has led to high upfront costs with the payoff coming further down the road. I do still believe that Valeo is undervalued, but this is a company that is deep in the doghouse and will need time to reemerge.

Read more here:
Valeo Hits The Wall, And The Wall Falls On Top Of It

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