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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